Deal frenzy kicks off New Year

After a subdued few years following the financial crisis, mergers and acquisitions (M&A) activity has returned with a vengeance. Last Monday saw $100bn worth of takeovers announced worldwide, the strongest start to the year since 2000.

Among the most eye-catching deals were Japan’s Suntory paying $16bn for US spirit maker Beam. US cable operator Charter’s $61bn bid for its rival Time Warner was rebuffed; a tie-up would constitute the third-largest deal since the financial crisis.

Google scooped up Nest Labs, a maker of smoke detectors and thermostats, for $3.2bn. Britain’s Amec paid $3.2bn for US-listed Foster Wheeler – the biggest British purchase of an American construction group on record.

What the commentators said

Investment bankers and lawyers “are always trying to stir up M&A activity”, saying that deal-making is about to take off, the FT pointed out. This time round it seems they’re not just talking their book. The stars are aligning for an M&A upswing.

Companies have worked off debt and have plenty of cash, while interest rates remain extremely low, making it easy to raise debt. Bank lending has recovered and as the economic rebound has strengthened, companies’ shaky confidence in consumer demand – a reason they have sat on their cash so far – has strengthened.

Tech sector valuations are always “astronomical”, said The Daily Telegraph, but Google’s Nest purchase – worth 21 times sales – is “surely the most anyone…will ever pay for a thermostat company”. No wonder. Nest’s thermostats connect to your smartphone and learn your movements and habits in order to conserve energy.

The theme here is ‘the internet of things’, said Robert Cyran on Breakingviews: consumers communicating with, and controlling, their products remotely. There is huge potential.

A vending machine “that tells its owners precisely what needs to be refilled, and when, means fewer service calls and more fulfilled customers. Imagine how this extra information and automation can affect the whole supply chain of the economy.” Google is trying to gain a foothold in the tech sector’s next big thing.

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

Hedge fund manager Hugh Hendry: 'It felt like the sun rose only to humiliate me'

In a series of three short videos, Merryn Somerset-Webb talks to Hugh Hendry, manager of the Eclectica hedge fund, about everything from China to the US, Europe, and Japan.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


22 December 1973: Opec more than doubles the price of oil

On this day in 1973 Opec, the oil price cartel, more than doubled the price of oil from $5.12 a barrel to $11.65.