U.S. Mergers Outlook Likely Good Long Term, Baronoff Says
The outlook for mergers and acquisitions probably will be good over the next two or three years as corporations cast off caution to foster growth, said Steven Baronoff, head of M&A at Bank of America Corp. (BAC)
“In the near term, M&A activity will be choppy,” Baronoff said today at the Bloomberg Dealmakers Summit in New York. “In the long term, the fundamentals are there -- people feel like it’s a good time to be a buyer.” He took part in a panel on U.S. M&A with Ventas Inc. (VTR) Chief Executive Officer Debra Cafaro and Peter Clare, co-head of U.S. buyouts at Carlyle Group.
The global rebound in takeovers faltered this quarter, with dealmaking dropping more than 20 percent from the previous period, according to data compiled by Bloomberg. Private-equity firms may take longer to return to dealmaking because of conditions in the debt market, which have squeezed financing, Clare said. The amount of leveraged loans raised last month fell to the lowest since 2008.
The picture is better for corporate acquirers as there are plenty of potential targets trading at attractive values, giving them more opportunity to gain scale to compete with rivals, he said.
“It’s risky to stay as is,” said Cafaro, whose Chicago- based real estate investment trust bought Nationwide Health Properties Inc. in July, the biggest deal among health-care REITs in history. There have been about $1.78 trillion in deals announced globally this year. The largest so far is Dallas-based AT&T Inc. (T)’s proposed $39 billion purchase of T-Mobile USA from Deutsche Telekom AG. (DTE)
North American Deals
North American acquirers had about $237 billion in pending and completed deals in the third quarter, a 20 percent decline from the previous period, according to data compiled by Bloomberg. For every $2 U.S. companies spent on purchases in the third quarter, European ones spent less than $1, Bloomberg data show.
“M&A follows the economy almost exclusively, with a little bit of a lag,” said Paul Parker, head of global mergers and acquisitions at Barclays Capital in New York. “There is a strong impetus for getting deals done, but it’s going to follow the economy.”
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