M&A Tipping Point

Posted on Wednesday, 22 April 2009. Filed under: Commentary, Mergers |

Are we at the tipping point where we are back into a more robust M&A market?

Just look at yesterday’s headline in the Financial Times‘M&A springs back to life’.  Reporting on three mega-deals (Oracle’s agreement to buy  Sun Microsystems for $7.4 billion, PepsiCo’s offer of $6 billion to buy out investors in its two biggest bottlers and GlaxoSmithKline announcement of a $3.6 billion purchase of Stiefel Laboratories), it really did look like a ‘Merger Monday’ … evoking memories of many a ‘Merger Monday’ back in the heyday of 2006 and 2007.

I was at an M&A breakfast this morning sponsored by CriticalEye and Accenture, and not only did the event start with the moderator showing yesterday FT headline, but the general concensus was the FT was reporting something that market practitioners had been seeing for a while, at least for strategic deals.  (Notably, there was some disagreement about private equity deals.)

There certainly seem to be more bulls now than bears amongst the people in the M&A market that I see.  The backlogs on deals is not getting smaller anymore, even though financing for deals is still tight and deals continue to be cancelled that had been many months in the making.

Whereas only a few weeks back, the general concensus was that the reviving M&A market was limited to a relatively small number of industries (led by pharmaceuticals — sse the post here of a few weeks back), now there appears to be activity in a number of industies.  Although, I must admit, despite the Oracle / Sun deal, relatively few in the technology sector for the moment.  Deals also don’t appear to need the government to make them happen, as we had in financials last year.

Are we at the tipping point?  Before answering, do note that The New York Times reported on 29 October 2008 — almost six months ago — in a similarly entited article (‘The Tipping Point? Merger Deals Could Be Ray Of Hope’) that M&A might be leading the overall equity markets out of their bottom.


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