Bold Buyers Make Record Dealmaking an Everyday Affair
(Bloomberg) -- Transformational takeovers are a jewel in the crown of this record year for dealmaking, as a slew of buyers seek acquisitions far exceeding anything they’ve attempted before.
Wall Street banks have been earning outsized fees as they help companies chase bigger and bigger prey. About 60% of major takeovers this year were the largest the buyer had ever announced, according to a Bloomberg analysis covering transactions of at least $1 billion. On average, those deals were about 10 times the size of any the buyer had struck before.
Every working day, a new bold move was announced, with roughly 300 companies sealing their biggest-ever acquisitions this year, the analysis shows. Examples abound of executives dramatically stepping up their ambitions.
This week alone has seen Oracle Corp. agree to its biggest-ever acquisition with the $28.3 billion takeover of medical-records systems provider Cerner Corp., and Bank of Montreal strike its record purchase with a $16.3 billion deal for BNP Paribas SA’s Bank of the West unit. The transactions helped take global dealmaking to $5 trillion for the first time in a calendar year.
This month, Australian biotech firm CSL Ltd. agreed to acquire Swiss drugmaker Vifor Pharma AG for almost $12 billion. DoorDash Inc., led by co-founder Tony Xu, said in November it will buy Finnish food-delivery app Wolt Enterprises Oy for $8 billion. In both cases, the purchases were nearly 20 times the size of any previous takeover the company had done.
“We are in an environment where clients are motivated and empowered to do deals,” Cathal Deasy, global co-head of mergers and acquisitions at Credit Suisse Group AG, said in an interview. “Trends driven by technological disruption, climate change and the pandemic are subjecting the ecosystems of many industries to dramatic change and challenging boards to reassess their strategic options.”
Jack Dorsey’s payments firm Square Inc. agreed in August to buy Afterpay Ltd., an Australian “buy now, pay later” company, for $29 billion in stock. It’d never previously announced a takeover worth more than $300 million, the Bloomberg data show.
Even little-known companies are getting in on the act.
Qatari lender Masraf Al Rayan QSC merged with cross-town rival Al Khalij Commercial Bank PQSC in a $2.2 billion deal completed last month. Okta Inc., a maker of identity-verification software, bought smaller competitor Auth0 earlier this year for $6.5 billion. Neither company had done a deal above $50 million before.
It’s this kind of ambitious acquisition that’s fueling revenue for investment banking titans like Goldman Sachs Group Inc. and JPMorgan Chase & Co., which are both planning to boost bonus pools for their dealmakers by 40% to 50%.
So far, companies have been willing to pay top dollar to satisfy shareholders’ appetite for growth at all costs. Soaring markets have certainly helped, with many of the purchases being funded with stock.
“When the equity markets are as strong as they are and you have a lot of M&A, it’s not at all surprising that so many companies attempted their biggest deals,” said Scott Barshay, chair of the corporate department at law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP.
“You had strong shareholder support for transformational deals and a cost of capital that’s essentially the lowest that’s ever existed,” he said in an interview.
With the specter of rising interest rates on the horizon, however, many investors are starting to look at things more soberly. It remains to be seen whether these acquisitions will pay dividends over the long run.
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