A series of blockbuster deals has led to a restart in M&A activity since early July, with companies preparing to prepare for the recession and exit deals that were shut down due to the pandemic.
Eight deals worth more than $ 10 billion have been signed in the past six weeks, according to data from Refinitiv, making it the fastest start of the second half for megadeals since 2007 when there was an M&A boom before the financial crisis.
The list of offers includes the $ 21 billion sale of Marathon Petroleum’s Speedway gas station business to Seven & i Holdings, the Japanese owner of the 7-Eleven chain. It also includes the $ 20 billion deal for analog devices to buy competing chipmaker Maxim Integrated Products.
“This is very extraordinary in terms of how this bounceback happened,” said Michael Carr, co-head of global M&A at Goldman Sachs.
The coronavirus pandemic brought a six-year deal boom to a halt. Business leaders place transactions to concentrate on refurbishing operations, while activist investors keep a low profile in fear of a backlog as they push for change in the midst of a health crisis.
Once stock prices have recovered, many of these deals considered earlier this year are back on track.
Refinitiv monthly data shows June and July each recorded more than $ 300bn in total M&A activity, compared to $ 100bn in April and $ 130bn in May.
“The backlog is very busy and I would expect things to continue, with the exception of a major event that stops things,” said Alison Harding-Jones, head of M&A for Europe, the Middle East and Africa at Citigroup.
“The types of transactions we expect to see are major strategic acquisitions, shares for shares among companies in the hardest hit sectors and an increasing number of bids for private equity,” she said.
Some companies are looking to make deals that will help them have smarter economic climates, Nestor Paz-Galindo, global co-head of M&A, told UBS.
“People are thinking about how to build scale and resilience, and that’s a driver of M&A,” he said. Deal stocks that “you would never have done” when stock prices tumbled in April have become easier since stocks jumped back.
Most of the largest deals involve companies based on US. The largest European leading deal was German group Siemens Healthineers’ $ 16.4 billion deal for US-buying Varian Medical Systems, which makes devices for cancer treatment.
Blair Effron, co-founder of Centerview Partners, was more cautious. “The problem at the moment is that the ability to become comfortable enough to make a big bet in a face-to-face environment is shrinking,” Mr Effron said.
“Transformation offers will pick up as the health crisis subsides.” he added.
While major deals have been restored, the pandemic unleashed several key deals agreed before the crisis. Others are in trouble, such as the planned € 10.7 billion takeover of Dutch diagnostics group Qiagen by its larger US rival Thermo Fisher.
Thermo Fisher on Monday night needed support from two-thirds of Qiagen’s investors to seal the deal. But a series of hedge funds hold out to vote their shares in favor of the deal, claiming that demand for Qiagen’s Covid-19 research test kits means Thermo Fisher’s supply is underestimating the company.
