Worldwide M&A Activity Dips in First Quarter

The value of merger and acquisition (M&A) deals worldwide fell by 10.3% in the first quarter of 2013 from a year earlier, despite a series of major deals in the period such as the US$28bn takeover of Heinz.According to a survey released by Mergermarket, the total for Q113 came to US$405.9bn, against US$452.3bn in Q112. However, for the fourth quarter in succession the average size of each deal was more than US$300m.

Mergermarket said that the decline largely reflected last year’s multi-billion dollar merger between commodities trader Glencore and mining group Xstrata, which boosted the total for Q112.

The biggest deal in Q113 was the acquisition of Heinz by Warren Buffett’s Berkshire Hathaway and investment firm 3G Capital. Liberty Global’s US$21.9bn takeover of Virgin Media in February accounted for nearly a fifth of all merger and acquisition activity in Europe since the start of the year.

The survey includes both formal offers and completed deals, and therefore includes the attempted US$21.8bn buyout of Dell by the computer maker’s founder, Michael Dell, and private equity company Silver Lake Partners.

Transatlantic Divide

The Heinz and Dell deals reflect a resurgence in the US by private equity. During Q113, private equity buyouts totalled US$84.8bn, their highest level since Q410. European buyout firms underperformed their US peers, with M&A activity falling by more than a third to US$17bn, while the US saw its buyout value rise by 114% year-on-year. Both Africa and the Middle East showed a year-on-year increase in deal value, reflecting strong interest in energy, mining and utilities companies.

However, after a flurry of activity in the early months of this year, M&A activity stalled in March. Data from Bloomberg shows that the value of mergers during the month was only US$100bn and the lowest for four years.

Concerns over US spending cuts, leadership changes in China and the persistent sovereign debt problems in Europe – which resurfaced last month with a near-meltdown of the financial system in Cyprus – are all cited as factors weighing on executives’ confidence. These factors offset record cash piles accumulated by many companies and strong gains by many equity markets worldwide since the start of 2013. These could yet persuadfe more companies to push ahead with M&A deals before interest rates begin to rise.

JP Morgan headed the M&A league table for Q113, working on 46 deals collectively worth US$124.2bn over the period according to Mergermarket. Goldman Sachs took second position, with 54 deals worth US$103.5bn, followed by Bank of America Merrill Lynch (BoA Merrill) with 29 deals worth US$90.3bn.

The top five M&A deals during the three-month period were as follows:

  • Berkshire Hathaway and 3G Capital Partners’ US$27.3bn purchase of HJ Heinz.
  • Michael Dell and Silver Lake Partners’ US$21.8bn bid to take Dell private.
  • Comcast buying out GE’s 49% share in NBCUniversal for US$16.7bn.
  • American Airlines and US Airways agreeing to merge in a deal valued at US$4.9bn.
  • Kinder Morgan Energy’s US$3.9bn purchase of Copano Energy.

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