Mergers and acquisitions make a comeback
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Illustration: Sarah Grillo/Axios
A slew of high-profile headlines led by Microsoft's expected acquisition of social media video app TikTok helped bring the Nasdaq to another record high on Monday.
Why it matters: The mergers-and-acquisitions market looks like it's bouncing back, joining the revived credit and equity markets as well as the market for new public companies through IPOs and special purpose acquisition companies (SPACs).
- Goldman Sachs did warn in a recent note to clients that the 51 SPAC offerings this year — raising a record $21.5 billion that's up 145% from the same period a year ago — have lagged on performance so far.
What's happening: In addition to Microsoft's big pickup, security company ADT saw its shares jump 56.6% on news that Google plans to buy a nearly 7% stake for $450 million to use ADT services in its Nest home security devices.
- Varian Medical Systems jumped 22% on news of a $16 billion buyout by Germany’s Siemens Healthineers, and Kansas City Southern gained after a report of a takeover bid expected to be worth $20 billion, Reuters reported.
Flashback: Data firm CB Insights reported last month that M&A deals started picking back up in the back half of the second quarter, but with significantly more deals in Asia where VC deal activity rose 20% quarter over quarter.
- North America and the rest of the world now look to be picking up the pace.
The big picture: “The market is revolving around M&A activity possibly picking up,” Jake Dollarhide, CEO of Longbow Asset Management, told Reuters. “It means CEOs are more confident about the future. Otherwise, why would they lay out billions of dollars?”
Yes, but: As Axios' Dan Primack noted in mid-July, the approval time for big deals has been increasing as the coronavirus pandemic has slowed and scattered government agencies needed to sign off on them.
- In general, U.S. regulators have beefed up scrutiny of new deals, especially when there are multibillion-dollar companies involved.
- This could mean that even as more firms agree to tie-ups in 2020, they could be delayed through the end of the year.
By the numbers: The announced deal value for U.S.-based companies through July 9 was 64% lower than the same period in 2019, according to Refinitiv, with aggregate deal value between Q1 and Q2 2020 down more than 40%.
