There's Been A Ton Of M&A Activity In 2014

There have been a lot of mergers this year.

The first quarter of 2014 was the busiest first quarter for U.S. M&A activity since the first quarter of 2007, according to MergerMarket.

The first quarter also saw the largest aggregate deal value since 2007 and the largest average deal size since 2009.

And in the second quarter, there have been three U.S. merger proposals worth at least $US40 billion.

On April 22, Valeant made its first offer for Allergan, which was worth about $US46 billion, and has twice increased its offer for the Botox-maker. Valeant’s deal raises a number of issues for the pharmaceutical industry, which we discussed at length last week.

On May 18, AT&T reached an agreement to acquire DirecTV for $US95 per share. The offer represented a total transaction value of $US67.1 billion.

And just yesterday, medical device-maker Medtronic agreed to acquire Covidien in a deal worth $US42.9 billion that also involves a controversial “tax inversion” plan.

The Medtronic-Covidien mega merger also comes amid at least three deal announcements this morning worth more than $US1 billion.

And today’s deals also follow last Friday’s announcement that Priceline would buy OpenTable for $US2.6 billion.

Recent reports have also said that Sprint is getting close to buying T-Mobile for more than $US30 billion.

And let’s not forget about Comcast’s $US45 billion deal to buy Time Warner announced in February, which proposed to create the nation’s largest cable company, which customers probably won’t be crazy about. And neither are some U.S. lawmakers.

This chart from FactSet shows the number of deals and the aggregate deal value over the last 15 months.

As you can see in this chart from FactSet, volume and value have both been elevated in 2014 compared to last year.

But it’s the mega deals that really get people’s attention.

In today’s Wall Street Journal, two separate articles discuss the possibility of further consolidation in the cable and media space.

Miriam Gottfried’s Heard on the Street column said it could be the right time for CBS and Viacom, which split in 2006, to get back together.

Meanwhile Amol Sharma and Keach Hagey report that smaller TV channel owners like AMC Networks and Scripps Networks could benefit from being acquired by a larger company.

But this increase in deal activity does not come as a complete surprise.

Reports from financial advisory firms American Appraisal and KPMG said that M&A activity in 2014 was expected to be strong.

American Appraisal said it expected consolidation across industries to increase deal volumes in 2014.

KPMG said 63% of the more than 1,000 M&A professionals surveyed expected their company or their clients to initiate at least one acquisition in 2014.

With the stock market near record highs, companies are also using their stock prices to finance deals, a la Facebook’s $US19 billion acquisition of WhatsApp, which was comprised of 75% stock and 25% cash.

Interest rates and overall market volatility also remain low, making it easy for companies to borrow money to finance large acquisitions.

Don’t be surprised to see even more merger activity this year.

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