M&A boom may signal the top

Mergers and acquisitions deals have reached new heights. But history suggests it won't last.

Recent volatility hasn't dampened the urge to merge. On 9 September alone, $40bn worth of deals were announced worldwide, with a $12bn Hong Kong utility buyout leading the charge. August was the busiest month for mergers and acquisitions (M&A) in American history.

Asian M&A now stands at $700bn for this year, the second-fastest pace for this stage in the cycle on record. Deal making has been strong across the board, with insurers the latest sector in the spotlight. Last week Japan's Mitsui Sumitomo Insurance took over Amlin, a Lloyds of London insurer.

Globally, M&A looks on track to reach $4.58trn, eclipsing the 2007 record of $4.3trn, says JDSupra.com. The frenzy has been driven by firms' big cash piles, low interest rates making it cheap to borrow to buy rivals, and gradually rising confidence. More and more firms "are pushing ahead with contentious hostile [unsolicited] bids", adds James Fontanella-Khan in the FT, another sign of the "robustness of the M&A cycle".

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For example, pharmaceutical group Mylan has taken its offer for smaller rival Perrigo straight to the shareholders. There have been several short-term wobbles in the past few years, and none has seriously dented M&A. Unless the latest turbulence leads to "serious market disruption", deal-making should continue, notes Citi's Mark Shafir.

M&A follows the market, rather than leading it. Still, the two previous M&A peaks came before major downturns in 2000 and 2007. So all this dealmaking looks like another sign that the bull market is long in the tooth.

Andrew Van Sickle

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.