M&A Shows Signs of Covid Comeback With Hopes of Record Drug Deal

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(Bloomberg) -- The prospect of a record tie-up in the global health-care industry is helping stir dealmakers’ confidence that mergers and acquisitions activity can rebound from its deep coronavirus slump.

British pharmaceutical company AstraZeneca Plc made a preliminary approach last month to U.S. rival Gilead Sciences Inc. about a potential merger, Bloomberg News reported Sunday. If they decide to proceed, it would be the largest health-care deal ever and could be sign of things to come, say bankers and lawyers.

“The M&A market is beginning to show green shoots of activity,” said Anu Aiyengar, co-head of global M&A at JPMorgan Chase & Co. She said the pick-up would be seen “particularly among well capitalized strategic acquirers pursuing logical targets, as well as companies seeking to do stock-for-stock deals in volatile equity markets.”

Global M&A volumes have almost halved this year, according to data compiled by Bloomberg, with companies forced to focus on surviving the economic shocks from Covid-19. The value of announced M&A, excluding minority investments, only just topped $100 billion in April and May combined -- the lowest two-month period in 22 years.

While more than $15 billion of transactions have been terminated by mutual consent because of the virus’s impact, advisers now say deal talks put on hold are resuming as corporate boards respond to the reopening of economies and debt markets and strong central bank support.

“We are seeing an increasing level of dialogue, particularly around mergers, and are optimistic this will lead to a rise in M&A volumes,” said Anton Sahazizian, head of U.S. M&A at boutique advisory firm Moelis & Co.

M&A Shows Signs of Covid Comeback With Hopes of Record Drug Deal

Top executives at Citigroup Inc. and UBS Group AG have predicted a wave of post-Covid consolidation in Europe in key sectors such as financial services. The private equity industry is also beginning to show signs of a revival: buyout firm Bridgepoint is restarting the sale process of Iberian agrochemical company Rovensa in a deal that could be worth more than 1.2 billion euros ($1.3 billion), people with knowledge of the matter said this month.

Multinational companies in Europe and Asia -- where countries have recovered more from the pandemic -- are starting to consider targets in the U.S., according to Jim Langston, an M&A partner at law firm Cleary Gottlieb Steen & Hamilton LLP. The health-care and technology industries are “particularly fertile ground,” as in many respects they’ve emerged stronger from the crisis, he said.

“M&A tends to beget M&A, so if we do see a transformative deal print, I think it will spur other buyers to act,” Langston said.

Still, any recovery is unlikely to bring this year back to 2019 levels of more than $3 trillion, given the continued economic slump and a rise in protectionism. Dealmaking in the second half of the year will continue to be affected by uncertainty around a Covid-19 vaccine and the U.S. presidential election in November, Langston said.

©2020 Bloomberg L.P.

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