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+

ScreenHunter_01 Mar. 25 09.51

New to MoneyWeek?

Ed Bowsher Editor Money Week

Welcome, and thank you for visiting us.

Here at MoneyWeek, our aim is simple. To give you intelligent and enjoyable commentary on the most important financial stories of the week, and tell you how to profit from them.

If you've enjoyed what you've read so far, I've got something you'll definitely be interested in.

Every working day the MoneyWeek team sends out a hard-hitting email, 'Money Morning', giving you a rundown of the latest financial events, and revealing what you should do to maximise profits and head off losses…

And with your permission, I'd like to send you Money Morning for FREE.

To sign-up enter your email address below.

We hope you enjoy your stay on the site. Good luck with your investments!

Ed Bowsher,
Digital Managing Editor, MoneyWeek

(No thanks)

Because these emails are completely free, we do have to fund them with advertising. Occasionally we will send you promotional emails, however we will never give, sell or rent your email address to any other companies.For more information, please see our Privacy policy.

Comment on this article

MoneyWeek magazine

Latest issue:

Magazine cover
Walking out on the banks

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 3 FREE Issues
Shale gas 'fracking' promises to transform Britain's energy market. Find out what it is, what it means, and how to invest.

More from MoneyWeek

The problem with the Bank of England

Fracking: Nine reasons not to get carried away

Five small-cap stocks worth a flutter

This Dutch company could help us tame floods

ScreenHunter_01 Mar. 25 09.51

Get the latest tips and investment opportunities from MoneyWeek magazine: Claim 3 FREE Issues HERE