Action-packed year for global M&A activity

Pharma, energy and food have been the hotspots for merger deals



After a few years of tepid action, global merger and acquisition (M&A) activity boomed in 2014 and has sustained through 2015. The value of global M&A hit $1.7 trillion in January-July 2015, 29 per cent higher than in the comparable 2014 period. At 12,450, the number of deals too is up 6 per cent compared with last year. This includes both completed and pending deals.

North America and Asia Pacific, which account for three-fourths of the mergers and acquisitions worldwide, have seen deal-making (in terms of value) surge 36 per cent and 56 per cent, respectively, so far in 2015. The deal count too is higher (15 per cent up) for companies from the Asia Pacific region.

Chinese companies have been active deal makers in 2015, striking deals worth $164 billion in 2015, more than double that in 2014. The deal count too is a quarter more than last year. In India, on the other hand, the aggregate deal value of $6 billion until July 2015 has been only two-fifths of that in January-July 2014. The deal count, though, is up 39 per cent.

So, which sectors have been the hotbeds of activity in 2015? Pharma, oil and gas, real estate and food companies have accounted for a chunk of the deal making in 2015.

Big deal

The $55-billion HJ Heinz Company and Kraft Foods Group merger, which has created one of the world’s largest food and beverage companies, has been the biggest deal so far.

The merged entity is expected to be in a better position to stand up to the challenge of shifting consumer preferences, from processed foods to healthier options. On completion, energy giant Royal Dutch Shell’s proposal to buy BG Group for $70 billion would create the world’s largest liquefied natural gas company.

But, given the mammoth size of the combined entity, the acquisition needs the go-ahead from anti-trust bodies in several countries.

Having got the US Federal Trade Commission’s nod, the proposed deal has already passed its first hurdle. As oil and gas producers worldover battle the impact of falling crude prices, the industry is predicted to see more consolidation.

In the pharmaceutical space, the $19.8-billion takeover of Pharmacyclics by AbbVie has been the largest so far.

The acquisition, also one of the year’s most expensive, will help AbbVie reduce its dependence on a single product and diversify its product portfolio.

The healthcare services industry too has seen hectic activity; many deals are yet to be approved, though.

With ObamaCare (Affordable Care Act) bringing in more business for health insurance companies but at the same time forcing them to cut costs, many players have been engaged in merger talks. Aetna’s proposed acquisition of rival insurer Humana for $37 billion, which is still awaiting regulatory approval, is one such deal.

Another industry which promises much action is media — here Charter Communications’ $79-billion proposed purchase of Time Warner Cable is one deal to watch out for.

With Americans increasingly moving away from television to watching videos on the internet, cable companies have been scouting for M&As to gain scale. The deal, which will quadruple Charter Communications’ customer base, is expected to bolster its bargaining position with television network companies.

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