Blockbuster Deals that Died a Decade Ago are Coming Back to Life
Blockbuster deals that died a decade ago are coming back to life, as sectoral, regulatory and political tailwinds create favourable conditions for reviving transformational transactions.
In the last three months alone, executives and mergers and acquisitions (M&A) bankers have sought to resurrect deals involving companies with a combined market value of roughly US$300 billion – with varying degrees of success.
‘Animal Spirits’
These situations have all reemerged amid a broader recovery in global dealmaking, which is widely tipped to accelerate under the second Donald Trump presidency in the US. Record stock market levels are also boosting boardroom confidence about pursuing big M&A, according to Valeriya Vitkova, a senior lecturer at City University of London’s Bayes Business School.
“These deals are driven by both animal spirits and just general merger frenzy and the two can reinforce each other,” Vitkova said.
Broad Recovery
Global transaction volume rose 15 per cent to hit US$3.3 trillion last year, data compiled by Bloomberg show, helped by cheaper borrowing costs, strong equity markets and companies simplifying their businesses via asset sales and spinoffs. There is also a strong belief among M&A advisers that Trump’s re-election and pro-business agenda will fan the deal flames by freeing up more cash for acquisitions via corporate tax cuts and by lowering regulatory barriers to big deals across sectors.
“Deals previously considered too complex or risky are being re-evaluated, driven in part by a pro-growth narrative from governments and a perception of shifting regulatory landscapes,” said Nigel Wellings, a partner at Clifford Chance in London. “However, whilst regulatory attitudes may be encouraging, they may not yet have evolved enough to significantly reduce execution challenges.”
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Conclusion
While some of the same hurdles remain, such as disagreements over valuation, lack of shareholder support and cultural clashes, the renewed confidence among dealmakers and the favourable conditions are likely to lead to a resurgence in blockbuster deals. As PJT Partners chief executive officer Paul Taubman predicted, this could be the best M&A year in a decade.
Frequently Asked Questions
Q: What is driving the resurgence in blockbuster deals?
A: Sectoral, regulatory and political tailwinds are creating favourable conditions for reviving transformational transactions. Record stock market levels and a pro-business agenda are also boosting boardroom confidence about pursuing big M&A.
Q: What are some examples of revived deals?
A: Rio Tinto and Glencore have held early stage discussions about combining their businesses, while SGS and Bureau Veritas are in advanced talks to create a European champion for testing and certification. Mondelez International has also made a fresh attempt to buy Hershey.
Q: What are the challenges to sealing these deals?
A: Disagreements over valuation, lack of shareholder support and cultural clashes are some of the traditional hurdles to sealing these deals. Political opposition is also increasingly a factor, especially in sensitive sectors such as banking and mining.
