Citi's Shafir Says M&A Pace Must Quicken to Avoid Big 2019 Drop

(Bloomberg) -- Dealmaking needs to accelerate through the rest of 2019 to avoid a sharp drop-off in activity for the year, according to Citigroup Inc.’s global co-head of M&A.

“Clients are still interested in transacting but the numbers are disconcerting,” Mark Shafir said in a presentation Thursday at Tulane University’s Corporate Law Institute conference in New Orleans. “We need the business to accelerate in the second half.”

After a blockbuster start to January, the rest of the first quarter has so far failed to live up to the momentum set by Bristol-Myers Squibb Co.’s $74 billion deal to buy Celgene Corp. and Fiserv Inc.’s $22 billion combination with First Data Corp. -- both announced in the first 16 days of the year.

About $655 billion in deals have been announced globally so far in 2019, a drop of 14.4 percent from the same period last year, according to data compiled by Bloomberg. More than half of that volume was announced in January, with activity in March on track to be the slowest since January 2014, the data show.

“We’d hope that after the rout in the markets in December, it’s just taking a while to pick back up,” Shafir told the annual gathering of prominent M&A lawyers, bankers, proxy solicitors, publicists, reporters and other deal junkies.

Last year was the worst for U.S. stocks since the financial crisis, with December’s 9.2 percent drop in the S&P 500 marking the biggest decline in the final month of a year since 1931. Global M&A activity topped $4 trillion in 2018, with 35 of the biggest 50 deals of the year announced in the first half, Shafir said.

Tech Disruption

Still, there’s plenty of opportunity for activity to increase in the next nine months, and one driving force that’s not going away anytime soon is tech disruption, he said.

“If you’re not getting disrupted today it’s only a time game, because it’s coming,” Shafir said he tells clients who ask whether they’re insulated from the threat of technological advancements putting pressure on their core business.

That’s pushing dealmaking among providers, but also forcing companies that aren’t traditionally focused on the industry to be more active in tech M&A. From 2016 to 2018, a third of all technology transactions were non-tech buyers acquiring technology assets, Shafir said. That’s up from just 15 percent from 2001 to 2003, with overall tech dealmaking increasing threefold over the same period.

Celgene, Goldcorp

Citigroup is the No. 2 M&A adviser this year, behind JPMorgan Chase & Co., according to data compiled by Bloomberg. The bank worked for Celgene on its agreement with Bristol-Myers -- 2019’s biggest deal so far -- for General Electric Corp. on the $21.4 billion sale of its bio-pharmaceutical business to Danaher Corp. and for Goldcorp Inc. on the $10 billion acquisition of Newmont Mining Corp.

Shafir joined Citigroup Inc. in 2008 from Lehman Brothers, shortly after helping negotiate the sale of the bankrupt firm’s U.S. operations to Barclays Plc. He was co-head of M&A at Lehman, where he rose through the ranks as a technology deal-maker.

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