Corporate makeovers drive corporate takeovers in 2016 M&A bonanza
NEW YORK/LONDON: A telecommunications carrier seeks to become a TV network and movie studio owner. A major software company acquires one of the world’s largest social networks. A smartphone maker snaps up a manufacturer of Internet-connected audio speakers for cars. In 2016, mega deals became ever more transformative.
A drive by some of the world’s largest corporations to find new avenues to expand in the face of anaemic economic growth led to major acquisitions in areas adjacent to their core business. This helped make 2016 the third-biggest year on record for mergers and acquisitions, trailing only 2015 and 2007.
“Companies are reinventing themselves, looking at their business in a new way with regards to how can they be a disrupter, and how they can prevent being disrupted — and this opens up deal flow” said Chris Ventresca, global co-head of M&A at JPMorgan Chase & Co.
Among these transformative deals was this year’s biggest — US telecommunications company AT&T Inc’s $85.4 billion (£69.5 billion) agreement to acquire media company Time Warner Inc, the parent of CNN, TNT, HBO and the Warner Bros movie studio.
Other such deals included software behemoth Microsoft Corp’s $26.2 billion acquisition of professional social media network LinkedIn Corp, and Samsung Electronics Co Ltd’s $8 billion deal to buy car electronics maker Harman International Industries.
“The pace at which technology is impacting industries and the convergence between more traditional industry sectors have never been more on the forefront of people’s minds,” said Cary Kochman, head of North American M&A at Citigroup Inc.
SURPRISE EVENTS: Global M&A volume in 2016 fell 17 per cent from last year’s record to $3.6 trillion, while the number of deals remained almost flat at 44,688, according to preliminary Thomson Reuters data.
Despite heightened geopolitical uncertainty around the world, which was exacerbated by surprise events including Britain’s vote to leave the European Union and the election of brash political outsider Donald Trump as US president, cross-border M&A accounted for nearly 40 per cent of total M&A activity, as companies continued to push for growth beyond their core markets.
“It’s been impossible to look at a deal without considering political instability as a result of yet another referendum or election,” said Luca Ferrari, head of M&A in Europe, the Middle East and Africa at Bank of America Corp.
German drug and crop chemical maker Bayer AG announced its $66 billion takeover of US agrochemicals company Monsanto Co, while ChemChina signed a $43 billion acquisition of Swiss seeds group Syngenta AG, as consolidation in the sector intensified.
China outbound cross-border M&A, nearly a third of which was in the United States, totalled $221 billion, more than double the record of $109 billion set last year, as the Asian powerhouse pressed on with its grab for resources. Deal value of Chinese acquisitions in the United States jumped 841 per cent this year over last.