US Bucks Global Trend with M&A Increases in Q2

Share Article --Despite a general drop in global M&A activity in the second quarter of the year, dealmaking in the US bucked the trend by increasing 14 per cent during the same period.

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US bucks global trend with M&A increases in Q2

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Despite a general drop in global M&A activity in the second quarter of the year, dealmaking in the US bucked the trend by increasing 14 per cent during the same period.

The overall M&A figures measured by Thomson Reuters for the April to June period in 2012 were somewhat mixed. On the one hand the value total of global deals was up 23 per cent on the first quarter. On the other hand, however, the volume of deals was down by 5 per cent and the value was still far lower than the deals carried out in the same period last year.

It seems, as well, that this slowdown is widespread, with two-thirds of the top 22 countries in the world, in terms of active M&A markets, experiencing a slowdown in the first half of 2012, on a year-on-year basis. This goes for both domestic and overseas activity, illustrating a very different picture than last year’s market place when cross-border M&A was a driving force in business growth all over the world.

In the US, however, things were looking a lot less bleak, with deal value in the second quarter exceeding the first by an impressive 8 per cent. The most lucrative of these deals was the buyout of Pfizer’s nutrition arm for $12 billion by Nestle. Another high-value deal was the takeover of Cooper Industries plc by Eaton Corporation for $11.46 billion.

Thomson Reuter’s general manager of business law solutions, Steve Obenski, said that the global downward trend for M&A is likely to continue as the economic climate continues to take its toll on dealmakers’ confidence. However, he adds that the growth in the US and UK M&A markets could indicate a brighter future. He stated, "Continued economic and political uncertainties in many parts of the world may further dampen activity in the coming months. However, the increased activity in the US and UK is an encouraging sign.

“High levels of corporate cash reserves and untapped private equity funds mean that potential buyers will continue to be on the lookout for opportunities that make strategic sense."

Indeed, in the second quarter, the value of private equity deals was up 14 per cent in terms of volume and by 48 per cent when it comes to value, compared with the first three months of the year. The trend was most definitely towards sellside deals, which are currently exceeding buyside deals and have done so for nine of the 11 most recent quarters.

Thomson Reuters’s report showed that private equity buyers - although very active in the M&A market - are still very much affected by the uncertainty in the financial markets and required reverse break fees in nine out of ten deals in the second quarter. They were also found to increasingly allow ‘go shop’ periods when making deals during the period.

The largest private equity deal that took place in the period was the Walgreen Co purchase of 45 per cent of Alliance Boots GmbH from KKR & Co. The deal was valued at $6.7 billion.

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Catherine Malone
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