The past 6 months has been abuzz with M&A activity in the IT sector as a lot of Indian companies snapped up domestic as well as foreign companies. I thought it made sense as the IT companies traditionally are sitting on enough cash to go hunt for acquisitions in an increasing competitive market.
However, i did not expect M&A activity to happen in other sectors even as the global economy seems to have recovered from the 2009 crisis. The credit markets continue to be weak and there is limited access to capital in general. Turns out i was wrong!A M&A tracking report by Dealogic estimates that,
Global M&A Acitivity Has Reached $1.5 Trillion in the first half of 2011 itself, a 22% increase from last year levels
A 22% increase from last year levels is a significant jump especially as the global economy seemed to have taken a hit from the high growth level in the last quarter of 2010.
US remains the most active region for M&A
M&A activity increased across all regions suggesting that there are still companies across the globe looking for inorganic growth. US maintained its leadership in terms of total M&A deal volume in the first half of 2011 closely followed by Europe and Asia-Pacific
|Region||Total Value ($ Bn)||% Increase (over last year|
There is no bifurcation in terms of inbound and outbound deals to make any statements in terms of why Asia-Pacific region grew the least in terms of M&A activity given the relatively fast growing economy in the region. One possible hypothesis (if majority of deals were inbound) could be that Asia-Pacific companies made significant inroads in international markets by acquiring companies in the US and Europe.
Some other highlights on the global M&A activity for the first half of 2011 are:
- Real Estate witnessed the maximum M&A activity with 1,321 deals amounting to $147.8 Bn. This could have been due to opportunities available in the US where a real estate companies are strived for cash
- China ($84.3 Bn) led the M&A activity in Asia-pacific region followed by Australia ($71.9 Bn), Japan ($55.8 Bn) and India ($32 Bn). China is undoubtedly the Asian powerhorse and industry analysts are consistent with their upbeat mood on China
- Goldman Sachs led the cross border advisory ranking with $154.9 billion, followed by JPMorgan with $101.7 billion and Morgan Stanley with $93 billion
Even as the global M&A activity has increased in 2011 and there is another 6 months to go, emerging markets seem to have lost steam in terms of M&A activity as well in 2011. Emerging market’s share in the global M&A stood at only 24%. The total deal volume was $363.2 Bn in the first half of 2011 and even the average deal size decreased by 10%
The global M&A climate is expected to remain positive for the rest of the year as well. Companies are looking to expand in new geographies and acquisition route could be the preferred route for a majority of companies. I personally think that Asia-Pacific will account for more outbound M&A deal activity in the second half of the year.
What are your thoughts on the increase in global M&A activity for the first half of 2011? Is it a good sign for the economy or vice-versa