The M&A train powered through instability this year, keeping a pace dealmakers worry won’t be maintained in 2020.
Global mergers and acquisitions weathered geopolitical tensions and roiling markets to post US$2.99 trillion in volume this year, a 1.5 per cent dip from 2018 though still the fifth-best year ever.
The number of deals this year through Friday dropped 4.2 per cent to 29,015, according to data compiled by Bloomberg. The biggest was United Technologies Corp.’s agreement in June to buy Raytheon Co., creating an aerospace and defense player worth more than US$100 billion.
“The current M&A market has proven to be unstoppable,” said Dusty Philip, Goldman Sachs Group Inc.’s co-head of global mergers and acquisitions. “Despite spikes in market volatility and macro concerns regarding trade and political uncertainty, we’ve seen a flurry of large scale M&A transactions in recent weeks.”
The bank’s “backlog is clearly up from the beginning of the year,” Philip said.
Goldman Sachs remained the top-ranked dealmaker in 2019, advising on 281 deals worth US$1 trillion, according to data compiled by Bloomberg.
JPMorgan Chase & Co., neck and neck with Morgan Stanley for the No. 2 slot, followed with 258 deals worth US$872 billion. Morgan Stanley advised on 233 deals worth US$813 billion.
While last year they were buoyed by a flush of private equity deals and transactions in the middle-market, this year was propped up by a rush of mega mergers. The top three investment banks were also helped as turmoil in Europe stung the region’s dealmakers.
Board rooms have plenty to worry about next year: the tumultuous U.S. presidential campaign, the U.K.’s Brexit deadlines, tariff-fueled trade tensions and regulatory regimes targeting the world’s largest companies.
There will likely be fewer large deals in 2020, partly because of regulatory issues, said Robert Kindler, Morgan Stanley’s global head of mergers and acquisitions. Kindler expects the number of transactions to be comparable to this year, even as volumes shrink.
“I don’t expect that in anticipation of the election there will a rush to do deals out of concern with the possibility of a change in administration,” he said. “I don’t think there’s that much of a difference between the current administration and what some of the Democratic candidates are saying.”
Some deal drivers have not let up, such as shareholders pushing for buyout paydays over stock buybacks. As global economic activity grows more subdued, companies seeking growth are fighting over fewer desirable assets.
Private equity firms, flush with an estimated US$1.4 trillion in dry powder, are benefiting from cheap financing and finding partners to buy bigger targets. The largest this year was the US$14.3 billion buyout of fiber network company Zayo Group Holdings Inc. announced in May, in which Stockholm-based private equity firm EQT AB joined Digital Colony Partners.
Several private equity firms have been circling Germany’s Thyssenkrupp AG, which could fetch more than 15 billion euros (US$16.7 billion), people familiar with the matter have said.
Alison Harding-Jones, head of M&A for Europe, the Middle East and Africa at Citigroup Inc, expects a busy first half of the year.
“There’s support for strategic deals that are fairly priced — demand for high quality companies is strong across strategics and private equity,“ she said.
Health-care M&A volumes hit an all-time high in 2019, reaching $461 billion. Mega deals included Bristol-Myers Squibb Co. buying Celgene Corp. and AbbVie Inc. acquiring Allergan Plc.
Christina Dix, Bank of America Corp.’s head of health-care banking for Europe, the Middle East and Africa, said pharmaceutical companies will focus on optimizing their portfolios amid drug pricing pressure and U.S. health-care reform.
Jonathan Davis, an M&A partner at Kirkland & Ellis who advised AbbVie on the Allergan deal, said the deals pipeline is strong but he is watching whether companies show increased caution next year.
“There are a lot of positive conversations going on, but that is balanced by a few pronounced headwinds, including an upcoming election cycle and associated political and regulatory uncertainty, high valuations and recent choppiness in the credit markets.” Davis said.
To combat future market swings, companies are using stock to fund deals at the highest level in almost 20 years. Acquisitions by U.S. companies in which part of the payment is stock have surged 41 per cent to US$753 billion, higher than any previous full year since 2000.
Paying in stock, which ties a deal’s risk to the market, will remain a popular option to hard cash, said Anu Aiyengar, JPMorgan’s head of M&A for North America.
“When you have a large amount of uncertainty in the world,” she said, “one way to address that is to do stock for stock deals.”
Coronavirus: Ministers balance science and politics in latest rules – BBC News
It’s not a day for optimists, even though the prime minister himself is one of that tribe.
Tomorrow, it will be six months exactly since he told the nation to stay at home.
This time, Boris Johnson stopped well short of slamming the country’s doors shut.
But what really stood out in his long statement in a miserable-looking Commons was his message that the limits put in place today will last another six months.
Even if you are very fond of your own company, lucky enough to have a secure job you enjoy and a comfy spare room where you can do it, it is quite something to contemplate.
The government now expects that all our lives will be subject to restrictions of one kind or another for a whole year – March 2020 to March 2021.
As each month ticks by, it becomes harder to imagine a return to anything like normal political life, or, more importantly, the way we all live.
We may not be waiting for a return to life as we knew it, but grinding through a moment of change.
‘Shelter the economy’
But if you were listening carefully, something else was different too.
The country became familiar with the slogan “Stay At Home, Protect the NHS, Save Lives” – it was emblazoned on government lecterns, repeated again and again by government ministers in interview after interview, on bus shelters, pop-up ads on the internet, wherever you looked.
That phrase was retired after the most intense period of the lockdown, but echoed today with one important additional condition.
Boris Johnson’s driver today was to “save lives, protect the NHS” and “shelter the economy”.
As we discussed here yesterday, concerns about the economy played more strongly in Downing Street after fierce resistance from backbenchers, and arguments from the next-door neighbour in No 11 of the economic risks of a short, sharp closure programme.
Fears about how the country makes a living have always been part of the decision-making process for the government, grappling with these acute dilemmas.
But the political appetite inside the Tory party for sweeping restrictions has certainly dimmed.
The changes announced today do make economic recovery harder, the “bounce back” the government dreamt of looks harder to achieve, but they are not as draconian as they may otherwise have been.
Ministers used to make great play of following the science, now they are certainly following the politics too.
Only the unknowable progress of the disease will, in time, suggest which call was right.
Covid: How the coronavirus pandemic is redefining Scottish politics – BBC News
The pandemic has probably done more than anything to define Scottish devolution in 21 years of Holyrood decision making.
Before coronavirus, the Scottish Parliament’s policy choices – from free personal care for the elderly to minimum pricing of alcohol – made it distinctive.
Now, Scottish ministers are making life and death decisions affecting everybody almost every day.
The exercise of emergency powers to combat Covid-19 commands public attention like nothing before.
We’ve had six months of lockdown restrictions and after a recent period of relaxation, they are tightening again as coronavirus cases rise.
Paying attention is essential to knowing whether or not you can go to work, visit your granny or have friends round for dinner.
It is First Minister Nicola Sturgeon rather than the prime minister, Boris Johnson, who is deciding for Scotland because public health is devolved.
Many of her decisions so far have matched those by the UK government for England and the devolved administrations for Wales and Northern Ireland.
That was especially true in the early stages of the crisis when there was much talk of a four nations approach – but differences have emerged over time.
The Scottish government has generally been more cautious about lifting restrictions than the UK government.
Bars and restaurants stayed closed in Scotland for longer and it was slower to lift quarantine for people arriving from Spain, before this was reimposed across the UK.
By contrast, the Scottish government was the first in the UK to restore full-time classroom education in schools after the summer.
Scottish ministers did coordinate with the other administrations to introduce the “rule of six” for people attending social gatherings.
However, on closer inspection, the Scottish rule differs from that for England in two key respects.
It is more restrictive in limiting the six people to two different households and more flexible in exempting children under the age of 12.
This is devolved decision making in action as never before.
Some argue divergence across the UK is confusing and undesirable, but opinion polls consistently suggest the Scottish public trust Holyrood to set the pace.
After a period in which Conservatives argued that Scotland should leave lockdown in lockstep with the rest of the UK, a multi-speed approach became accepted.
The pandemic, however unwanted, has given Ms Sturgeon an opportunity to demonstrate leadership and the public seems to appreciate that too.
An Ipsos Mori survey for BBC Scotland in May suggested 82% of people thought Ms Sturgeon was handling the pandemic either very or fairly well.
By contrast, only 30% from the same sample of around 1,000 Scottish adults gave Boris Johnson similar credit.
More recent polling has produced similar indications even although coronavirus outcomes are not profoundly different between the UK nations.
The Office for National Statistics reported that England had the highest increase in excess deaths in Europe to the end of May. At that point, Scotland had the third highest behind Spain.
While politicians of all stripes have been working to suppress coronavirus, coronavirus has suppressed much of our everyday politics.
Previous Holyrood priorities like completing an expansion of free childcare, introducing new devolved benefits and reviewing the school curriculum have been deferred.
Major controversies such as the Scottish government’s mishandling of complaints about the behaviour of the former first minister, Alex Salmond, seem less potent.
The Scottish government parked preparations for an independence referendum in 2020 to prioritise its response to the pandemic.
That has not meant opinion on the major constitutional question in Scottish politics has remained static.
As coronavirus has swept the country, a trend has emerged in opinion polls suggesting there is now majority support in Scotland for independence.
Some analysts suggest this could be directly linked to the focus on devolved leadership in the crisis.
The trend has worried Conservatives enough to change their Scottish party leader and some in Scottish Labour have unsuccessfully tried to change theirs.
Those who favour the union point out that Scotland has been supported by what they call the “broad shoulders” of the UK economy throughout the pandemic.
Lockdown is largely underwritten by the Treasury with huge funding for furlough and other schemes to support business.
Nationalists say this help would be replicated by Holyrood if it had the economic powers of independence.
Unionists question the scope for doing so in a country which, as a devolved part of the UK, had a notional deficit of £15bn before the pandemic took full effect.
Economics will always be important in the debate over independence as will the public’s sense of identity.
In the 2014 referendum, Scotland voted 55%-45% for continued union. If indyref2 was held tomorrow, the polls suggest the result would go the other way.
There is much that could sway opinion further – both for and against independence – in the coming months.
The economic crisis the pandemic brings, the impact of Brexit and the efforts of politicians to overcome the continuing health emergency could all have a bearing.
The public could weary of politicians telling them what they can and can’t do especially if their livelihoods are on the line.
Arguments over all this and more will find expression in the campaign for next May’s Holyrood elections.
Together with elections to the Welsh Assembly and local government in England, these will be the first major votes of the pandemic.
A pandemic that has already given new definition to devolved power and could be playing a role in shaping opinion on the future of the Union
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