With the quest for growth driving increased consolidation, 2014 has so far been a great year for mergers and acquisitions. Deal volume, as measured by value, hit a seven-year high, reported the New York Times.
Acquirers showed increased appetite for hostile bids, noted Reuters. Additionally, American corporations trying to lower their tax rates took aim at foreign targets in so-called inverson deals.
Corporations are flush with cash, while interest rates remain low, said the New York Times. Many businesses, having already relied on cost cuts, stock buybacks, and special dividends to boost their stock price, are now turning to acquisitions for growth.
“Companies have strategic imperatives to do deals, they have the cash to do deals, and they can borrow additional cash at record-low rates,” said Frank Aquila, an M&A partner at Sullivan & Cromwell, according to Reuters. “It really is a bit of a perfect storm when it comes to dealmaking.”
Reuters said that in the first half of 2014, the volume of deals amounted to $1.77 trillion. That figure is 73 percent higher than the value of deals in the first half of 2013, and higher than deal volume in the first six months of every year since 2007.
And many of these deals are big ones, said The New York Times. According to the Times, forty-six deals worth more than $5 billion were announced this year, a 130 percent increase over the same period last year. Their value totaled $740.7 billion, 230 percent more than that of the megadeals announced in 2013’s first six months.
“With both the target and acquirer’s stock generally up after deals are announced, buyers see value creation and tend to be more aggressive even if targets are not willing to sell,” Ravi Sinha, executive vice chairman of global corporate and investment banking at Bank of America Merrill Lynch, told Reuters.