Wednesday, April 18, 2018
Business

More 'headline-grabbing' deals expected as economy improves

LONDON — More "headline-grabbing" acquisitions are likely over the coming year as businesses take advantage of a period of improving economic growth and cheap financing.

That's the conclusion of business consulting firm EY, which says the value of takeover deals announced in the first half of 2014 — up 50 percent from the same period the year before, to $1.7 trillion — struck its highest level since the end of the boom years in 2007. Not since the global financial crisis erupted, prompting companies to batten down the hatches, has the value of deals been that high.

For years, big mergers and acquisitions have dwindled as companies stocked up on cash reserves to weather the global economic storms.

The latest EY figures confirm the shift. The past few months have seen a flurry of high-value corporate activity, including the planned $67 billion tieup between Comcast and Time Warner, AT&T's $67 billion deal with DirecTV and Valeant Pharmaceuticals' $55 billion hostile approach for botox maker Allergan.

EY, using data from Dealogic, said the next six to 12 months should continue to provide the "ideal window of opportunity" for businesses to pursue more deals. High equity valuations, low interest rates, cheap debt and high cash levels built up during the years of retrenchment have provided a favorable environment for deal-making, it said

Those favorable conditions may fade as major central banks start raising interest rates as the global recovery gathers pace. In the United States, expectations are for rates to start rising in 2015, potentially increasing the cost of financing deals.

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Published: 04/18/18