M&A: urge to merge proves irresistible

Deal-making often accelerates close to the top of a cycle. So it could bode ill that January marked the strongest start to a year for global mergers and acquisitions (M&A) since the peak of the dotcom boom in 2000.

Andrew Van Sickle
By Andrew Van Sickle
published

Analysts note that deal-making often accelerates close to the top of a cycle. So it could bode ill that January marked the strongest start to a year for global mergers and acquisitions (M&A) since the peak of the dotcom boom in 2000, especially in light of the nasty market wobble over the past few days. In total, $367bn worth of deals were agreed, notably French drugmaker Sanofi's $11.4bn purchase of biotech company Bioverativ.

There were 11 transactions worth more than $5bn. In the UK, the value of M&A jumped to £421bn, up 33% on the previous year. Meanwhile, 2017 was the fourth year in a row that worldwide M&A exceeded $3trn an unprecedented streak.

M&A always flourishes when animal spirits are high. Until last week, the S&P 500 spent 202 consecutive days within 3% of an all-time high, s Michael Batnick on Ritholtz.com a new record. Market confidence in the economic backdrop has risen. And US tax reform appears to have given the urge to merge added impetus, with many of the deals announced coming from across the Atlantic.

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Companies can expect a corporation tax cut from 35% to 21%, and will be allowed to bring overseas earnings back, increasing the war chest for acquisitions. Still, given the nervous start to February, January's figure may not be eclipsed for some time.

Andrew Van Sickle
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.

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