State of Global Mergers and Acquisitions

A discussion on the state of Global Mergers and Acquisitions Process and the largest deals that were completed in 2011.

The first three quarters of 2011 saw a significant rise in Mergers and Acquisitions reaching over $800 billion. While the fourth quarter saw a significant drop in deals compared to the rest of the year; mergers and acquisitions are still on the rise. Even with the decrease of activity of the fourth quarter, Mergers and Acquisitions volume achieved an estimated increase of 7% to 10% higher than 2010. Even though most investments continue to come from the United States and Western Europe, Mergers & Acquisitions are on the rise especially in the BRIC countries (Brazil, Russia, India, and China) and the rest of the Asian market.

A number of emerging markets governments and companies are entering the Mergers and Acquisitions area. Certain investment funds have been created in the Asian and Middle Eastern markets attracting investors and increasing the number of acquisitions.

Companies from countries such as China, India, Malaysia, Russia, the UAE, and South Africa are snapping up established firms at an astonishing rate. According to a study conducted by A.T. Kearny, out of 2,168 majority acquisitions between developed and developing countries in 2007, almost 20% were driven by companies from developing countries. They further report that this pattern is growing by 26% annually.

Mergers and acquisitions increased significantly around the world in 2010 according to data from Thomson Reuters.

Q1 & Q2 2010 Data:

  1. Volume: $1.1 trillion – 9.4% increase compared to 2009
  2. Number of deals: 19,000 – 3.8% increase compared to 2009
  3. Cross-border Mergers and Acquisitions: $389 billion – 36.5% increase compared to 2009 ($243 billion)

As it was the case in the previous years, much of the Mergers and Acquisitions deals in the first and second quarters of 2010 came from emerging markets, which accounted for 32% of overall Mergers and Acquisitions activity for that period; an 84% increase compared to 2009.

Sectors with most M&A activity:

  1. Energy & power industry
  2. Telecommunication industry
  3. Media & entertainment industry

Largest transactions by value in 2010:

  1. Mexico: American Movil purchased Carso Global Telecom for $27.5 billion.
  2. US: CenturyLink purchased Qwest Communications.
  3. UK: News Corporation purchased British Sky Broadcasting for $13.7 billion.

Largest transactions by value in 2009:

  1. US: Pfizer purchase Wyeth for $64.5 billion.
  2. Australia: BHP Billiton purchased Rio Tinto for $58 billion.
  3. US/UK: Kraft Foods purchased Cadbury for $19.3 billion.

Governments help drive acquisitions from emerging markets.

  1. The Chinese government invested in a private equity, the Blackstone Group, now controlling 10% of that firm.
  2. The Chinese government also started a state-run company with the goal of investing up to $300 billion USD a year. Russia followed the same practices.
  3. A number of governments have created state-run funds most of them investing other investment funds and companies:

Country Fund Asset values in $ billions* (Inception)

  1. UAE Abu Dhabi Investment Authority (ADIA) $875 (1976)
  2. Norway Government Pension Fund of Norway (GPF) $380 (1990)
  3. Singapore Government of Singapore Investment Corporation (GIC) $330 (1981)
  4. Kuwait Kuwait Investment Authority (KIA) $250 (1953)
  5. China China Investment Corporation (CIC) $200 (2007)
  6. Hong Kong Hong Kong Monetary Authority Investment Portfolio $163 (1998)
  7. Singapore Temasek Holdings $159 (1974)
  8. Russia Stabilization Fun of the Russian Federation $157 (2004)
  9. Australia Australian Future Fund $61 (2004)
  10. Qatar Qatar Investment Authority $50 (2000)
  11. Libya Libya Arab Foreign Investment Company $50 (1981)
  12. Algeria Revenue Regulation Fund $43 (2000)

*Asset value as of January 2008

Several markets in Africa are also emerging especially Ethiopia and South Africa but political and security risk factors have prevented investors from targeting that continent. Over the last 3 months, the US and European markets have dominate the Mergers and Acquisitions market with strong outflows and inflows of investments in the US and Canada and strong inflows of investments in France and Germany.

Largest transactions in 2011 (some of these deals are still pending):

  1. Express Scripts agrees to buy Medco for $34.3 billion
  2. Duke Energy bids for Progress Energy for $25.53 billion
  3. Johnson & Johnson agrees to buy Synthes for $21.3 billion
  4. Sanofi-Aventis bids for Genzyme for $19.64 billion
  5.  BHP Agrees to Buy Petrohawk for $14.9 billion
  6. Nasdaq OMX and ICE bid for NYSE Euronext for $11.3 billion
  7. Icahn bids for Clorox for $11.9 billion
  8. Google agrees to buy Motorola Mobility for $9.8 billion
  9. Microsoft Agrees to Buy Skype for $8.5 billion
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