by Dan Burrows | April 15, 2013 1:22 pm
Merger Monday looks to be back with a vengeance.
Wall Street awoke to a couple of blockbuster deal proposals, collectively worth nearly $40 billion and bolstering hopes that the hot pace of mergers & acquisitions will keep accelerating through year end.
Goodness knows investment banks need the fees after years of suffering through a sleepy deal landscape. And it sure doesn’t hurt traders’ and investors’ psyches. With the economy looking like it’s slipping into its annual spring slowdown even as the stock market notches new all-time highs, there’s nothing quite like some multibillion-dollar deals to stoke confidence.
The splashiest Monday M&A headlines were made by Dish Network (NASDAQ:DISH), which is trying to scupper an agreement reached between Sprint (NYSE:S) and Softbank (PINK:SFTBY), the Japanese telecommunications giant.
Dish — the nation’s second largest satellite-TV provider after DirectTV (NASDAQ:DTV) — offered a total of $25.5 billion in cash and stock for Sprint, the country’s No. 3 wireless carrier.
Dish says its unsolicited bid represents a 13% premium to Softbank’s offer to buy 70% of Sprint for $20.1 billion. We’ll see what happens, but if nothing else, the offer puts Sprint in play and makes the already deal-active tech and telecommunications sectors more interesting than ever.
Wall Street was hopped up on M&A announcements even before the Dish news broke thanks to a big deal announced in healthcare Sunday night. Genetic testing equipment maker Thermo Fisher Scientific (NYSE:TMO) struck an agreement to buy rival Life Technologies (NASDAQ:LIFE) for $13.6 billion.
All of which serves to confirm the first-quarter trend that M&A is indeed picking up — at least in the U.S.
The total value of all deals struck in the U.S. jumped 38% in the first three months of 2013 compared with the year-ago period, according to data from Mergermarket. Tech, media and telecom were the busiest sectors for deal activity, contributing nearly 25% of all U.S. M&A value.
The Dish bid for Sprint shouldn’t come as too much of a surprise. After all, it’s no secret that telecom is undergoing a torrid pace of consolidation as cable and wireless companies add additional revenue streams and the ability to leverage costs by bundling services (bundles that they need to offer to compete).
Counting Dish’s bid, we’ve now had four deals valued at more than $20 billion so far in 2013, of which three were in tech or media: The H.J. Heinz (NYSE:HNZ) buyout, the Dell (NASDAQ:DELL) buyout offer and Liberty Global’s (NASDAQ:LBTYA) $22 billion bid for Virgin Media (NASDAQ:VMED).
Interestingly, just as the U.S. economy has been pretty much the only bright spot in a world wracked by recession or slowing growth, so too has it been the lone bright spot for dealmakers and companies looking to make strategic acquisitions.
Total global deal value dropped 7.8% in the first quarter vs. the prior-year period, according to Mergermarket, hurt by a 28% decline in recessionary Europe and a 51% decrease in almost-no-growth Japan.
Even worse, despite the pickup in the U.S., global deal value fell off a cliff sequentially from the fourth quarter, when it hit a five-year high. Indeed, the first quarter represented the largest drop in deal value from one quarter to the next in more than a decade, falling more than 76%, according to Mergermarket.
So it’s no coincidence M&A is doing well in the U.S. Confidence leads to more dealmaking, and more dealmaking helps boost confidence. Combined with ample corporate cash and cheap financing, this new-found confidence bodes well for more mergers and acquisitions for the remainder of this year and beyond.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
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