From 1 January through August this year, companies, private equity firms, and special-purpose acquisition companies (SPACs) have announced mergers and purchases worth more than $3.6 trillion worldwide, with about half—more than $1.8 trillion—in the U.S., data firm Dealogic reported.
Refinitiv, another research firm, pegs the total at $3.9 trillion, up from $2.6 trillion in 2019 and more than double the amount for the same period in 2020.
August, usually a quiet month for acquisitions, saw $500 billion in deals, according to the Financial Times.
The volume is the greatest for this eight-month stretch since Dealogic began tracking the number in 1995 and is on pace to pass 2007’s single-year $4.3-trillion record for M&A announcements, the FT noted.
Mega-deals worth $1 billion to $10 billion make up about half of the transactions’ total value, Dealogic noted.
However, several even bigger deals surpassed that category, including Discovery’s $43-billion purchase of WarnerMedia; Square’s takeover of Afterpay for $29 billion; and the $18-billion marriage between Indonesian ride-hailing star Gojek and Tokopedia, an online shopping powerhouse.
Also, Dell spun off VMWare in a $52-billion move and meal deliverer Grab made a $40-billion merger with a SPAC.
“High valuations of public tech companies are providing them with real currency to afford certain acquisitions,” Atif Azher, partner in the Simpson Thacher law firm, commented to the FT.
Also, international deals made headlines: the Irish firm Aercap bought General Electric’s aircraft leasing business for $30 billion; two Canadian railways wrestled each other to buy Kansas City Southern in the U.S. for $31 billion.
About 400 SPACs are waiting to spend $120 billion collected from investors, which could amount to as much as another $600 billion in purchases, JPMorgan Chase researchers reported.
In the U.S., the Federal Trade Commission reviews certain transactions worth at least $92 million. The agency has been unable to complete those reviews within the usual 30-day time period after a filing: it received 2,900 filings in the 10 months ending 1 August, 800 more than in its busiest full fiscal year in the last ten, the agency announced.
Tech deals led the parade of buyouts, with 8,742 deals representing 21 percent of M&As for the period, up from 16 percent last year and claiming the largest proportion since 2000.
The tech transactions were worth $832 billion, compared to $3.01 billion a year earlier and $2.91 billion in 2019, the FT said.
In addition, aerospace, autos and trucking, insurance, leisure and recreation, metals, publishing, and transportation all showed a volume of M&As that at least doubled their five-year averages, Dealogic said.
“With most businesses generating record profits, having access to inexpensive debt, and experiencing high share prices, it’s difficult to see M&A activity slowing over the next six to 12 months,” Frank Aquila, head of M&A work at law firm Sullivan & Cromwell, told the FT.
Investment banks and other advisory firms have scooped up billions in fees for structuring the deals, giving advice, and other services to buyers and sellers, according to The Wall Street Journal.
JP Morgan reported pocketing a record $3.6 billion in fees during the most recent quarter. Goldman Sachs said its fee income rose by a third and took in $1 billion in such fees in each of the last three quarters, the WSJ noted.
Goldman exceeded that level of advisory income only one other time since 2009, the WSJ said.
The revenues have helped make Goldman the best performer this year in the Dow Jones Industrial Average, gaining 56 percent since December.
Service fees have kept many big-bank stocks riding high: fees are paid when deals close and many of the biggest are still pending, promising big paydays ahead for the banks and, implicitly, their shareholders.
Banks including Goldman and Jeffries have used some of the extra cash to bid higher wages for talented new hires and to give raises averaging 30 percent to junior staffers, who often do the tedious detail work involved in putting deals together, to persuade them to stay under the heavy workload, the WSJ found.
TRENDPOST: The buyout boom has been fueled by the flood of cheap money the U.S. Federal Reserve and other central banks have poured into the world’s economy during the COVID War, all at artificially low interest rates.
Under those conditions, there’s a low price and little risk in bulking up a company by buying competitors.
The M&A spree is one more factor that will leave fewer companies determining the products and services we can buy and the prices we pay for them.