By Jason Rigoli, Principal at The White Oak Group
If you were to look at global merger and acquisition news over the past two weeks, you would think things are looking up. Over the past two weeks there have been almost $100 billion in potential deals. This is the highest level of M&A activity since December 2009 and is providing hope for dealmakers that 2010 will end on a positive note.
Since the start of this year, global deals total $1.29 trillion, which, according to Bloomberg News, is up 23% from the same time last year.
Even with larger than expected unemployment claims and a near 300-point drop in the Dow Jones Industrial Average, major companies were announcing deals during the past two weeks. In the past two weeks, some of the major deals have included Intel’s $7.7 billion all-cash takeover of McAfee and Dell’s offer of about $1.15 billion for 3Par which was later trumped by Hewlett-Packard’s offer of more than $1.5 billion only to be trumped again by Dell as the saga continues.
According to Bloomberg, if this global M&A pace continues over the next few days, the deal value for the month could reach $285 billion. That would make August 2010 the busiest on record since 2007, when the deals totaled more than $297 billion.
This week, I found an interesting article on Forbes.com that looked at what was driving this up-tick in M&A activity. According to the article, the tremendous amount of capital from private equity funds is one of these driving factors. This is in large part due to the potential roll off of the change in the tax rate, which will make funds ready for deployment by the end of 2010. The second driver is the S&P 500 has more cash in the balance sheet than it ever has, creating opportunities to buy good assets at reasonable valuations.
The article also posed an interesting question: Are private equity firms still wary and going to sideline their capital? Drop us a comment and let us know your predictions for 2010.