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Blockbuster deals more than doubled in the first quarter of this year, signalling a nascent recovery in the mergers and acquisitions market following a lengthy drought.
The number of takeovers worth at least $10bn jumped in the first three months of 2024 compared with the same period last year, driven by large US deals in the energy, tech and financial sectors, according to data from the London Stock Exchange Group.
Eleven such transactions, with a total value of $215bn, were struck during the quarter, up from five takeovers worth a combined $100bn in the first three months of 2023.
“Mega-deals are thriving,” said Tyler Dickson, Citi’s head of investment banking, with companies “capitalising on the market conditions to accelerate growth”.
The overall value of global M&A climbed 30 per cent to $690bn, the data showed, even as the total number of deals announced fell 31 per cent.
The rebound in dealmaking comes after M&A activity plunged to a decade-long low last year, as a frenzy of activity fuelled by rock-bottom interest rates during the Covid-19 pandemic was followed by a sharp decline in takeovers.
“We’re back to average, or back to normal,” said Andre Kelleners, Goldman Sachs head of M&A in Europe, the Middle East and Africa. “We’ve seen a real, robust rebound from exceptionally low levels this period a year ago.”
Among the largest deals struck in the quarter were Capital One’s $35bn acquisition of Discover Financial, and chip design toolmaker Synopsys’s $35bn takeover of engineering software maker Ansys.
M&A has increased in anticipation of rate cuts from central banks, which investors bet could come as early as June. That has made financing for deals easier and cheaper to obtain, while IPOs have started to return to public markets that are trading at record highs.
“It’s clearly a better environment from a transaction point of view,” said Massimiliano Ruggieri, head of Emea investment banking at Morgan Stanley. “You can definitely point to a higher level of engagement from clients, both investors and issuers, that has continued throughout the quarter.”
While the US accounted for the majority of activity in the first quarter, with its share of global takeover activity at a 35-year high, dealmaking in Europe recovered particularly sharply. The value of European deals climbed 60 per cent from a year earlier to $127bn.
However, Asia-Pacific deals fell 28 per cent, to $90bn.
Bankers said sentiment in the market still remained cautious, with room for a pick-up in activity among private equity investors in particular. Buyout groups sit on a record number of assets, and face pressure to sell some of their portfolio companies and return capital to their backers.
“There’s a lot of volatility with a lot of fits and starts in the pace of activity,” said Stephan Feldgoise, global co-head of M&A at Goldman Sachs. “It’s a mixed-signal market. You have this extraordinary equity market performance but also some red flags, particularly when it comes to more economically sensitive consumers.”
However, a lag between when transactions are announced and when they close means that bankers must still wait for fees to rebound.
LSEG estimated that $24.2bn in investment banking fees overall have been earned so far this year, down 1 per cent on the same time last year. M&A fees recorded the steepest fall, dropping 14 per cent to $6.4bn, their lowest level since 2016.
JPMorgan held the top spot globally for M&A advice, followed by Goldman Sachs and Morgan Stanley.
Additional reporting by Ortenca Aliaj in New York
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