Mega-Deals Make Strong Comeback After 2017 Slowdown

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By Alexei Alexis

The total value of cross-border mega-merger deals so far this year has already exceeded 2017 levels, according to data compiled by Bloomberg Law.

Acquirers announced 14 cross-border deals valued above $10 billion totaling $315 billion during the first half of 2018, already surpassing last year’s $274.8 billion. The biggest transactions include Takeda Pharmaceuticals Co. Ltd.’s $80.2 billion bid for Shire PLC.

If the trend continues, the aggregate value of mega-deals could beat 2016’s $454.3 billion total, which was the highest since at least 2010, according to Bloomberg Law’s Quarterly Cross-Border M&A Market Update.

“We’re in a deal-friendly environment when you look at the economic conditions,” Bill Kucera, an M&A lawyer at Mayer Brown LLP in Chicago, told Bloomberg Law. “Companies have lots of cash. Interest rates remain relatively low. Stock valuations remain high. I think all those factors are giving companies confidence to pursue big deals.”

The mega-deal market has been generally robust over the past few years, although there was a slowdown in 2017. Uncertainty around tax overhaul efforts was a major factor for last year’s dip, according to Kucera. “That’s obviously behind us,” he said.

The market for large deals is performing well despite ongoing challenges, including rising tension between the U.S. and foreign trade partners. Qualcomm Inc. announced last month that it was abandoning its $44 billion bid to acquire rival chipmaker NXP Semiconductors NV, as Chinese regulators failed to approve the deal before its deadline.

“This may not signal a complete roadblock to deals, but long delays will be a fact of life so long as the current tariff fight continues,” Mark Ostrau, chair of the antitrust and trade regulation group at Fenwick & West LLP, told Bloomberg Law.

Another potential obstacle is newly enacted legislation to bolster U.S. reviews of foreign investments for national security purposes. Sensitive deals, especially involving Chinese investors, are expected to face increased scrutiny.

Such developments could affect some dealmaking but aren’t likely to result in a sea change, according to Kucera.

“Clearly, there are regulatory considerations that have to be navigated, but it may be riskier to do nothing,” he said.

To contact the reporter on this story: Alexei Alexis in Washington at aalexis@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

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