DealCloserBlog Roundup: The Best of 2014
2014 a rebound year for M&A in high technology, health care, telecommunications and other industries, and the momentum should last into 2015.
26 December 2014
Sadly, this year is ending. But on the bright side, in 2014, the prospects for dealmaking were the best they have been since the 2007-2008 recession. Below, there is a brief and — admittedly — highly selective top 10 roundup for 2014:
- Overall, 2014 was a great one for deals, especially in North America and Europe. It also was strong in specific industries, such as high tech, health care, energy, and telecom. The U.S. was a dealmaking trendsetter, given there were companies flush with cash, and that needed inorganic growth. Also, confidence rose that the market is fairly safe and sound — in fact, 67 percent of dealmakers we polled even told us they felt the market was on the mend.
- And some groundbreaking Intralinks-sponsored research proves M&A are actually quite healthy for the bottom line. (Intralinks did the study with the M&A Research Centre at Cass Business School, City University London.) The study discovered: 1) companies underperform the market during periods when they announce no acquisitions or divestments; and 2) they significantly underperform companies that announce one to two deals annually.
- And 2014 was the year of mega-deals, too (particularly in health care and telecom). The harbinger of all this good healthy M&A activity was most likely Comcast’s proposed $45 billion merger with Time Warner Cable. Announced last February, this was big bold move that will (if it finally closes) potentially create the largest cable firm in the country. This wasn't a one-off: On its heels came AT&T’s proposed $48.5 billion buyout of satellite TV provider DirecTV.
- And with some $100 billion worth of transactions, 2014 was possibly the best high tech deal year since 2000. (This involved an estimated 55 percent jump in tech deals over 2013.) And it wasn’t just the high-profile deals, such as the $3 billion Apple buyout of Beats, or Facebook’s $19 billion acquisition of WhatsApp. There were plenty of smaller deals, particularly in mobile. In fact, high tech was so active that some dealmakers think a bubble is in the making.
- We should also mention the deal market, as usual, had its fair share of M&A that didn’t close. Among them was Pfizer’s failed $118 billion bid for AstraZeneca. But although the deal didn’t succeed, it did help spur big pharma M&A.
- It was a competitive market for deals among general partners at private equity firms. As 2014 began, the amount of capital available to private equity firms worldwide was a record-breaking $1.077 trillion. In “this cash-glutted competitive environment, GPs have their work cut out for them,” as one expert observer noted.
- Interestingly, U.S.-based Burger King’s $11 billion buyout of Tim Hortons of Canada, a normally routine transaction, became a lightning rod for controversy. That's because the deal also involved a tax inversion, where the buying company relocates its headquarters in the acquired company’s legal location. Critics charged that this was an example of how big American companies dodge their U.S. taxes. Despite the hoopla, the Burger King-Tim Hortons deal went through, anyway.
- But speaking of tax inversions: The U.S. authorities tweaked the rules governing cross-border M&A tax inversions. The idea was to make inversions harder to execute. But an Intralinks survey indicated that 60 percent of the dealmakers polled feared this would make international transactions more difficult to execute. And I also believe that, in reality, tax inversions are statistically insignificant in M&A (as tracked by the Intralinks Deal Flow Predictor (DFP), a unique leading indicator of future global deal activity). Inversion transactions amounted to about 0.1 percent of deals overall.
- On a negative note, we saw that no company is 100 percent safe from hacking attacks — not even those involved in M&A. Take, for example, the recently discovered and highly sophisticated hacking ring called FIN4. This ring performed phishing attacks on about 100 dealmaking firms. So we should all be on our cyber-guard in 2015.
- Of the past, one thing we may note is that it’s a generally reliable indicator of the future. And given the M&A uptick in 2014, it looks as if dealmaking will remain healthy into next year. So says the Q1 2015 DFP. It indicated we’ll see an eight percent year-on-year increase in early-stage global M&A activity.
So, 2014 was certainly a great year for M&A, and the basics will remain the same heading forward. There are sellers and buyers; there are great assets and opportunities; and there is cash to fund deals and remake industries. And that should keep the dealmaking world an interesting place to be in 2015.