Written By Billy Sexton, Editor, AllAboutLaw.co.uk

Mergers & Acquisitions Are Up – But Why?

Written By Billy Sexton, Editor, AllAboutLaw.co.uk

Global mergers and acquisitions (M&A) activity was at the highest it has been since 2007, before that annoying little event called the financial crisis happened, the effects of which increased the price of Freddo’s to an outrageous 25p.

In 2014, M&A activity was valued at $.3.2bn, a 47.7% increase on 2013. This figure is just 11.8% short of the 2007 high of $3.6bn. So what kind of behaviours have stimulated this growth?

‘A Seller’s Market’

Private equity firms – think Dragon’s Den but on a much larger scale – noted a record number of exits, with the average price tag being the highest it’s ever been! By disposing of assets they’d been holding onto (in the hope they would increase in value), private equity firms made 2,054 exits at a value of $489.3bn.

Cross-Border Deals, European Interest & The Effect of China

There were 5,501 cross border deals, worth a whopping $1,399.7bn. And it’s not just the volume of deals; as in all areas of life (easy), size matters too. The average cross-border deal was $453.9m, one-and-a-half times the size of the average deal in 2013, which was $291.4m. The size of the deals were partly due to interest in US companies from Europe. For example, German corporations made three of their largest ever US-based acquisitions, each being valued at over $12.7bn.

Additionally, there was a plethora of inbound deals to Europe from the US and China. US-based companies generated $194.6bn of inbound European deals, with China pumping in £14.6bn, up 300% on the previous year. Lawyers suggest that this is due to relaxed governmental regulations on overseas acquisitions, particularly its approval process for acquisitions. Why the interest in Europe? The technology, media and telecommunications (TMT) sector is worth the most, with the offering of internet, TV, landline and mobile services in one bundle an attractive feature for buyers – Richard Branson’s idea of throwing Sky Sports in with your iPhone and outrageously slow Virgin Media internet (ask any student, they’ll verify the claims), was clearly a good one.

Popular Industries & Notable Deals

As mentioned, the TMT sector was popular, with Comcast’s proposed acquisition of Time Warner Cable being the highest deal globally, coming in at a tidy $68.5bn. Together, the two companies control two-thirds of the US broadband cable market and about 33% of US paid-TV subscribers. The deal has received much public attention, with Comcast deeming the deal to be pro-consumer, given their plans to invest millions into improving Time Warner’s cable network to increase speed and reliability.

Opponents to the deal, however, believe that the sheer size of Comcast following the merger will mean that the company will be able to dictate the direction of the broadband industry. There are also concerns that the price of broadband will increase so that Comcast can subsidise their video business in an attempt to kill off competition such as Netflix. There have even been suggestions that Comcast will use the merger to increase their spending on governmental lobbying (a figure which stood at $18m in 2013), so that future communications policies are in line with their interests.

The pharmaceutical industry also saw notable deals, with GlaxoSmithKline and Novartis completing a deal worth $14.5bn. GSK sold their oncology (treatment of tumours) unit, and bought Novartis’s vaccines, with both companies creating a consumer healthcare division. Apparently, some 500 lawyers worked on this deal. Speaking of lawyers…

Which Law Firms Were Involved?

Skadden Arps oversaw some 248 deals worldwide, valued at $593.8m. Cleary Gottlieb were ranked second, with M&A’s making them a nice little earner of $538.7m. In Europe, Freshfields topped the charts, having generated $354.3m from their M&A work. The rest of the Magic Circle (Allen & Overy, Clifford Chance, Linklaters and Slaughter and May) were ranked in the top ten.

Reckon you have what it takes to cut the world’s biggest deals for breakfast? Get applying for vacation schemes and training contracts now!

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