Stretching Global M&A Market... "8 Mega Deals Closed Since July"

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Since July, large-scale mergers and acquisitions (M&A) deals exceeding 10 billion dollars (approximately 11.9 trillion won) have been consecutively completed, showing signs of gradual recovery in the M&A market, which had shrunk due to the impact of the novel coronavirus infection (COVID-19). This is the result of companies, which had been hesitant due to uncertainty, actively engaging in M&A based on abundant liquidity.

According to global financial information company Refinitiv on the 9th (local time), there were eight mega deals worth more than 10 billion dollars each in the global M&A market over the past six weeks since early last month. A foreign media outlet evaluated this as the fastest increase in the second half of the year since the M&A boom before the global financial crisis in 2007.

Most of the large deals were centered around U.S. companies. On the 2nd, Japan’s major retail company Seven & I Holdings acquired Speedway, a convenience store operated by U.S. oil company Marathon Petroleum. The deal was valued at 21 billion dollars, making it the largest M&A deal worldwide since the COVID-19 outbreak. On the same day, Germany’s Siemens Healthineers acquired U.S. healthcare equipment company Varian Medical Systems for 16.4 billion dollars, and last month, semiconductor device company Analog Devices (ADI) merged with competitor Maxim Integrated Products for 20 billion dollars.

The consecutive mega deals in the M&A market, which had significantly shrunk due to COVID-19, were possible because a large amount of cash was injected into the market. As liquidity expanded and stock prices recovered, companies’ financial capacity increased, and they began pouring funds into acquisitions. Looking at the monthly M&A scale since the COVID-19 outbreak, it was around 100 billion dollars in April, when the economic impact intensified, and 130 billion dollars in May, showing little change. However, in June, as the U.S. and Europe lifted lockdown measures, the stock market recovered, and the M&A scale exceeded 300 billion dollars in just one month.

Nester Pazgalin, Global Head of M&A at global asset management firm UBS, analyzed, "People are thinking about ways to increase scale and resilience, and this will drive M&A," adding that some companies are seeking deals to improve the challenging business environment caused by COVID-19. Companies that had secured cash due to uncertainty are trying to secure growth engines through M&A.

M&A is expected to become more active. The Wall Street Journal (WSJ) reported that U.S. engineering company Honeywell Group plans to use liquidity to acquire undervalued companies. Greg Lewis, Honeywell’s Chief Financial Officer (CFO), said in an interview with WSJ at the end of last month, "We want to deploy capital. This is definitely an opportunity for us." U.S. online payment company PayPal has maintained its goal of spending 1 to 3 billion dollars on acquisitions despite the COVID-19 situation.

Allison Harding Jones, Head of M&A for Europe, Middle East, and Africa at Citigroup, said, "We are very busy catching up on delayed work," and added, "There will likely be strategic acquisitions centered around industries struggling due to COVID-19."