If you thought the M&A wave had crested, think again.
Four mega-deals worth a combined $240 billion (or more) are poised to propel 2016 toward a better-than-anticipated finish. The biggest, AT&T-Time Warner, was inked over the weekend at a healthy $108.7 billion (including net debt). That followed a long-anticipated move by British American Tobacco, which on Friday announced a $58 billion offer (also including debt) for the stake in Reynolds American that it doesn't already own. Then there's Qualcomm's $46 billion deal for NXP Semiconductors, which may be sealed as soon as this week -- and, oh yes, a possible CBS-Viacom reunion, which could be valued north of $30 billion.
Perhaps this surge in activity shouldn't be raising eyebrows. After all, anytime they're asked, bank CEOs and CFOs repeat phrases like "the pipeline remains healthy" and "clients remain interested in strategic dialogue," etc. Such statements are often received with a grain of salt, of course, but it would seem they aren't just bromides this time around, and there are good reasons to explain why.
In general, dealmaking -- and the willingness to undertake large transactions -- remains robust because the conditions for driving M&A are still in place, even against a backdrop of increased regulatory scrutiny. A shifting competitive landscape is driving consolidation in industries such as semiconductors, while for many large corporations M&A is one of the only ways to outperform in a slow-growth economy. It helps that companies continue to have easy access to financing, whether by tapping the equity market or issuing new debt at low rates -- and, importantly, borrowing costs will likely remain inexpensive even if interest rates are hiked in the near future.
So one can see why boards are forging ahead, despite potential uncertainty from the upcoming U.S. election as well as matters further away from home, like the potential fallout from Britain's exit from the European Union and China's slowing growth. Encouraged by their actions (and persuasive bankers), their rivals may too become emboldened, and follow suit.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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