Mergers and acquisitions continued to pile up in the third quarter, keeping 2014 on pace to set a host of new records, according to Dealogic.
Mergers and acquisitions where U.S. companies bought overseas targets came to $205 billion in the third quarter, topping the old record of $194 billion set seven years ago. Average deal sizes are at record levels, too, led by healthcare, telecoms and real estate. The three sectors have seen average deal values of $435 million, $1.1 billion, and $244 million, respectively.
And, for those who like boardroom drama, global hostile merges and acquisitions volume reached a record high of $560.1 billion so far in 2014, surpassing the previous record of $421.3 billion set in 2007.
As welcome as the mergers and acquisitions are for the investment bankers and lawyers who live off them, they’ve been helping boost stock prices too. After all, taking shares out of the market makes remaining shares more valuable. At the same time, the market assigns a higher multiple to any stock that’s a credible takeout target.
The third quarter had enough big mergers and acquisitions that a number of prominent deals didn’t make the list, such as Microsoft (MSFT) buying Minecraft for $2.5 billion or Zillow (Z) acquiring Trulia (TRLA) for $3.5 billion.
The top deals still generated plenty of heat and light of their own however. Here are the five biggest mergers and acquisitions of third quarter.
Top Mergers and Acquisitions: Dollar Tree (DLTR) to Buy Family Dollar (FDO) for $8.5 Billion
A combination of two of the smaller dollar chains has made the sector’s biggest player very nervous, but it seems there’s little it can do about it.
Dollar General (DG) has been trying to pry Family Dollar (FDO) from Dollar Tree (DLTR), but the target has said no deal — repeatedly. Maybe that’s just a negotiating tactic, but with DG offering $9.1 billion vs. $8.5 billion from Dollar Tree … well, talk about greedy.
Some consolidation was long overdue for the dollar-store chains. Years of aggressive expansion and competitive pricing in a glacially slow recovery finally caught up to the retail sector. The way this one is going, it looks like FDO really will wind up with DLTR. But that doesn’t mean Dollar General will still stand pat.
Top Mergers and Acquisitions: Burger King (BKW) Buys Tim Hortons (THI) for $12.5 Billion
This is a tax inversion deal, where the acquiring company will benefit from lower corporate taxes by being domiciled outside the U.S. This time, the acquirer wants to become a Canadian company.
Burger King (BKW) struck an agreement to buy Tim Hortons (THI) for nearly $13 billion. This marks the second time the Canadian donut-and-coffee chain will be owned by a U.S. burger joint. Back in the day, THI was owned by Wendy’s (WEN).
The tie-up, which will create the world’s third-largest fast-food chain, should help Tim Hortons with its overseas expansion efforts. Burger King, meanwhile, gets into the lucrative coffee business at a time when traditional burger chains are falling out of favor with consumers.
Top Mergers and Acquisitions: Merck (MKGAF) of Germany Buys Sigma-Aldrich (SIAL) for $17 Billion
Given all the mergers and acquisitions among U.S. pharmaceutical giants, investors may be forgiven for giving this one a double-take.
Merck of Germany (MKGAF) — a distant relation but completely different company from the U.S. firm that shares the same name — struck one of the biggest deals of the year so far. MKGAF is buying Sigma-Aldrich (SIAL) in a deal worth $17 billion. The new company creates a North American life sciences giant and reduces the German Merck’s reliance on blockbuster drugs.
Anyone holding Sigma-Aldrich stock has to be happy with this deal. Prior to the mergers and acquisitions news, SIAL was about 8% for the year-to-date. Now it’s up nearly 45%.
Top Mergers and Acquisitions: Reynolds American (RAI) Buys Lorillard (LO) for $27 Billion
Between competing with larger rival Altria (MO) and the inexorable loss of cigarette smokers, Reynolds American (RAI) and Lorillard (LO) had to do something dramatic. A big deal with a bunch moving parts sure fit that bill.
After RAI buys LO, it will sell some signatures brands — such as Kool, Salem and Winston — to the U.K.’s Imperial Tobacco for $7.1 billion in order to get antitrust approval. At the same time, British American Tobacco (BTI) will buy additional shares in Reynolds to maintain its stake in the new company and help finance the deal.
Tobacco hasn’t seen this kind of activity from mergers and acquisitions in ages. Given the way the industry is both shrinking and consolidating, we may never see a tobacco deal of this magnitude ever again.
Top Mergers and Acquisitions: AbbVie (ABBV) Buys Shire (SHPG) for $54 Billion
After Pfizer’s (PFE) bid for AstraZeneca (AZN), this was the biggest deal of the second quarter that didn’t get done … at first. But unlike that other would-be pharmaceutical tie-up, Abbvie (ABBV) and Shire (SHPG) finally came to terms.
Sure, the combined company will create one of the 50 biggest corporations in the world, with $25 billion in revenue and a market cap of close to $140 billion — but this deal wasn’t about size.
AbbVie made no secret that it bought Shire for tax purposes. In a so-called inversion deal, AbbVie will be domiciled in the U.K., where it will pay lower corporate taxes. Yes, the Treasury Department is making inversions harder and less appealing to pursue, but it’s too late to stop AbbVie.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.