Global mergers touch $1.14 tn in Q1

[Ulhas Joglekar]

The Economic Times Online
Global mergers touch $1.14 tn in Q1
Patricia Vowinkel
NEW YORK 1 APRIL
GLOBAL merger volume soared 68 per cent in the first quarter to a record
$1.14 trillion, led by a boom in European deal making and the rapid
transformation of the technology sector worldwide.
In the US, deal volume jumped 64 per cent to $578bn, propelled by America
Online’s proposed acquisition of Time Warner, a deal originally valued at
$160bn in stock and the second largest merger ever.
However, the total number of US deals slumped to its lowest level since the
third quarter of 1995 amid a sharp drop in the market value of a number of
established "old economy” stocks.
The total number of deals fell 14 per cent to 2,433 compared with 2,835 in
the year-ago first quarter, based on figures through March 31 provided by
Thomson Financial Securities Data.
With their market values under pressure, a number of US companies have
decided to exit the stock market and go private instead, fuelling a sharp
increase in buyouts by managements and investor groups.
In the first quarter, US deals where companies were being taken private
increased nearly fivefold to $10.3bn, up from $1.88bn in the year ago
quarter.
"You're seeing more and more of the private equity funds allocate dollars to
the technology sector,” said CS First Boston managing director Matthew
Harris.
Earlier this week, Seagate Technology announced a $20bn transaction that
takes No. 1 computer disk-drive maker private and sells its 33 per cent
stake in Veritas Software back to Veritas.
In the complex deal, an investor group led by Silverlake Partners, will
acquire the Seagate business for $2bn, plus it gets $800m in cash back. The
investor group includes Seagate management and investment firm Texas Pacific
Group.
"The other trend that I'm seeing is on the financial sponsor side, continued
interest by US financial sponsors for transactions in Europe,” said Meredith
Brown, head of the M&A group at law firm Debevoise & Plimpton. These
investor groups, which in the past had often acted as leveraged buyout
firms, now often prefer to take minority positions in target companies
instead, he said.
Unfriendly or even hostile tactics also are becoming increasingly popular in
Europe as well as in the United States. "The view is you've got to have
earnings growth to drive the stock price. If you can't get it organically,
then you need to think about buying it and if you can't buy it on a friendly
basis then you buy it on an unfriendly basis,” Mr Harris said. — Reuters

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