M&A surge driven by US deals makes for best January since 2000

[NEW YORK] After a dismal December, dealmakers made a comeback in January, logging US$275 billion of mergers and acquisitions globally to mark the best start to a year in almost two decades.

"M&A came back even though the markets felt choppy, and that shows how confident CEOs are," said Susie Scher, co-head of the global financing group at Goldman Sachs Group Inc.

The surge was led by North American deals, with US$187 billion of transactions announced during the month - up 40 per cent from 2018 - according to data compiled by Bloomberg. Asia was next with US$47 billion, an increase of about 10 per cent from a year ago, while in Europe M&A volumes fell about 24 per cent to US$30.5 billion, the data show.

In the US, Bristol-Myers Squibb's purchase of Celgene Corp. alone, valued at US$89 billion including debt, made sure December's US$52 billion total was surpassed on the third day of the year.

US$80 BILLION BONDS

You'd have to go back all the way to 2000 to find more M&A announced in the first 31 days of the year globally. That's when the biggest deal on record - Time Warner Inc.'s merger with America Online Inc. for US$186 billion including debt - catapulted the monthly total to almost US$410 billion.

Goldman's Ms Scher is expecting a solid year for M&A as investment grade financing markets - where blue-chip companies such as Bristol-Myers raise debt for funding acquisitions - recovered from a downbeat December and debt investors show a greater willingness to lend to riskier companies.

"Could you see US$70 to US$80 billion of bonds sold globally for an investment-grade deal? Absolutely," she said. "In the high-yield market there's capacity for US$20-billion deals globally across bonds and loans."

That would top last year's biggest deals. The largest bond sale in the investment-grade market in 2018 came from CVS Health Corp., which issued US$40 billion of debt in March to help finance its takeover of Aetna Inc. Blackstone Group LP's sale of US$13.5 billion in bonds and loans to fund its acquisition of Thomson Reuters Corp.'s financial-and-risk operations was the largest leveraged buyout of the year.

On top of easily available financing - for now - said Ms Scher, some companies also have extra cash on their balance sheets after US tax cuts last year. While some of the funds have already been pledged for buybacks, there's still plenty to deploy on potential M&A.

BLOOMBERG