Global M&A continues to rise with over $2.19 trillion
recorded in the first half of 2015, according to Dealogic data. This is an increase of 31% from
$1.67 trillion announced in the first half of 2014, and the second
highest half year volume on record, following $2.59 trillion
recorded in 2007. In addition, US targeted M&A reached a half
year record high of $1.03 trillion this year, the first time on
record any nation has broken the $1 trillion mark in a half year
These gains have been driven by an increase in "jumbo"
deals, which are mergers that are greater than $5 billion in value,
and account for 43% of all activity. Companies may find,
however, that these rising valuations result in a difficulty to
strike new deals.
When a company has already cut costs and is struggling to find
growth, M&A is a way to increase revenues. These high
valuations pose the risk that a company will borrow too much money
or overstate the savings it can achieve from the new deal.
Bankers, lawyers and academics interviewed by the Financial Times raise concerns about
the sustainability of the current boom. While some analysts claim
the current cycle is very different from the one that preceded the
financial crisis, it is possible that the high valuations coupled
with a growing number of hostile deals indicate that we are headed
towards a 2007 bubble. At this point in time, it is probably too
early to tell.
The author would like to thank Simone Nash, summer student,
for her assistance in preparing this legal update.
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