The “bread and butter” merger and acquisitions market of midsize deals is back, said Paul Parker, head of global M&A at Barclays Capital, the investment- banking unit of London-based Barclays Plc.
Deals of $1 billion to $5 billion have increased by 60 percent this year in terms of number of transactions, a “telltale sign of where the market is headed,” Parker said today in an interview on Bloomberg Television’s “InBusiness With Margaret Brennan.”
There have been $1.59 trillion worth of deals announced in 2010, on pace to top last year’s $1.78 trillion, according to Bloomberg data. Acquisitions of $1 billion and $5 billion made up 34 percent of the total, the highest in four years, while the percentage of transactions of more than $5 billion fell to 27 percent, according to data compiled by Bloomberg.
The third quarter was the busiest in two years, with $562.6 billion of announced transactions, led by BHP Billiton Ltd.’s unsolicited $43 billion offer for Potash Corp. of Saskatchewan Inc., the largest deal announced this year. The average deal premium paid in 2010 has fallen three percentage points to 22 percent from last year.
“You have a lot of structural reasons why people can pay a bit more and still have it be a good transaction,” Parker said. “We’re not seeing frothiness in the market.”
There is a “need and a desire” to get transactions done by Dec. 31 before anticipated changes in capital gains taxes, said Parker, who is attempting to close “a number” of sell- side transactions by year’s end.
Barclays Capital is No. 6 globally in M&A market share, advising 110 deals this year worth $231.9 billion. Parker has advised some of the largest telecommunications deals over the past 15 years, including WorldCom Inc.’s $47.1 billion acquisition of MCI Communications Corp. and Sprint Corp.’s $45.9 billion deal for Nextel Communications Inc., including net debt, according to Bloomberg data.