Energy Sector Is Now the Powerhouse of M&A Deals
As of March 23, announced global M&A deals for the first quarter rose to $505 billion, 6% higher than the same period last year, with U.S. companies accounting for more than a third of the deals. The proposals cited in the report reflect not only cash and equity but also assumption of debt and liabilities.
Energy and power captured the largest slice of global M&A activity, representing 21% of the deals announced. The sector generated $99.6 billion in proposed deal-making during the first quarter, up 9% from last year. U.S. companies were involved in more than half of the announcements, such as Schlumberger's (SLB) $12.2 billion offer for U.S.-based Smith International (SII).
"Anything related to resources is has consistently been among the top five for M&A," said Matt Toole, an analyst with Thomson Reuters.
He noted that while clean and green tech is all the rage among venture capitalists, there has yet to be an M&A in that sector mammoth enough to put a dent in the total deal-making landscape.
In Telecom, Carlos Slim's Moves Splash the Sector
The telecommunications and real estate sectors, which represented the third and fourth largest pieces of the M&A pie respectively, both posted triple-digit year-over-year growth, but it was largely driven by a few mega-deals.
America Movil's (AMOV) $27.4 billion move to acquire Carso Global Telecom had a dominant effect on the numbers for the telecommunications industry, which posted $52 billion in deals during the first quarter, a five-fold increase over the period last year. The Carso Global Telecom deal was the third-largest M&A transaction in the quarter, and is set to be completed in May.
America Movil should have an easy go at making the merger happen, given that both companies are controlled by Carlos Slim Helu, the world's wealthiest man. Slim, who reportedly has received approval from Mexican anti-trust regulators to move forward with the deal, is seeking to bolster his America Movil and leap ahead of rival Telefonica.
In the real estate sector, Simon Property Group's (SPG) unsolicited buyout bid for shopping mall rival General Growth Properties amounted to $30 billion when including debt and liabilities -- a figure that was roughly half of the sector's M&A activity. General Growth, which is currently in bankruptcy, seems more interested in going it alone, however.
"Real estate popped into the top five M&A sectors this year, mainly because of a few large deals," Toole said, comparing it to a similar scene that played out in the health care industry.
The financial industry, for those companies still standing, was not as active in the M&A realm as it had been. The sector experienced a 30% decline in first quarter deals, due largely to all the mega-buyouts and closures that occurred last year, noted Toole. Nonetheless, the financial sector captured 18% of the proposed M&A deals, making it the second-largest sector with $93 billion in money on the table.
Asia and U.S. Are Up, Europe is Down
Prudential's proposed (PUK) $35.5 billion buyout of the Asian arm of American International Group (AIG) was the largest deal offered up among all M&A deals in the quarter. It also propelled the Asia Pacific region to the top, when it comes to deal-making in the financial sector. The Asia Pacific region generated $106 billion in deal offers in the quarter, up 80% from last year. It marked the second time the region overtook Europe, which saw its deal making reach $79 billion. That marked a 57% drop for Europe's M&A activity year-over-year.
"This could mark the worst start of the year since Q1 1995," noted the report in assessing European M&A.
In the U.S., the story was vastly different: Deal offers were up 20% to $187 billion in the quarter, posting the nation's best start of the year since the first quarter in 2007, according to the report.
Toole credited the markets' strong performance for having given deal-making a lift.