Deal frenzy kicks off New Year

Takeover activity has had its strongest start to the year since 2000, with Google making headlines over its purchase of thermostat maker, Nest Labs.

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

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 anyonewill 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.

Recommended

Stockmarkets have a spring in their step
Stockmarkets

Stockmarkets have a spring in their step

Global stockmarkets have been basking in the post-Covid economic recovery as GDP, retail sales and manufacturing are all on the way back up.
23 Apr 2021
Stockmarkets shrug off turbulence
Stockmarkets

Stockmarkets shrug off turbulence

Stockmarkets have hit their first bout of turbulence of the year, but most are clinging onto January’s gains.
4 Feb 2021
Things are looking up for income investors as dividend payouts start to rise
Income investing

Things are looking up for income investors as dividend payouts start to rise

UK dividend payouts are ready to grow again, but this crisis has shown why income investors must diversify overseas.
3 May 2021
Three lessons from football’s European Super League disaster
Economy

Three lessons from football’s European Super League disaster

Businesses can learn from the failed attempt to create a European Super League, says Matthew Lynn.
2 May 2021

Most Popular

What is hyperinflation and could it happen here?
Inflation

What is hyperinflation and could it happen here?

The Bank of England has been accused of the kind of money-printing that could lead to Zimbabwe-style hyperinflation. But that's very unlikely to happe…
4 May 2021
Copper has hit a ten-year high, but this could just be the start of a huge bull market
Industrial metals

Copper has hit a ten-year high, but this could just be the start of a huge bull market

The price of copper is at its highest for ten years. But supply constraints and a massive rise in demand mean it’s not going to stop there, says Domin…
5 May 2021
Micro-cap stocks: how to get huge returns from tiny firms
Small cap stocks

Micro-cap stocks: how to get huge returns from tiny firms

Micro-cap stocks are often overlooked, but the British market has plenty of them and their potential is massive. Max King picks the best two investmen…
3 May 2021