Global M&A set for record in 2015 as companies pursue mega deals

Mergers and acquisitions by overseas companies in China more than quadrupled in value in the first half of this year.
Mergers and acquisitions by overseas companies in China more than quadrupled in value in the first half of this year.PHOTO: AFP

LONDON (BLOOMBERG) - Merger and acquisition activity is on track to reach record levels this year after a first half dominated by mega deals, even as valuations reach new highs, according to two pieces of research from data company Intralinks and consultancy EY.

Global M&A volumes for 2015 will probably increase by about 11 per cent from last year, according to Intralinks's latest Deal Flow Predictor, as cheap financing and growth plans drive deals. Last month was the highest June on record for transaction values, according to a separate report from EY, setting the second half up to challenge 2007 as the best year on record for M&A.

Europe, the Middle East and Africa and the US will continue to drive a surge in deals for the rest of the year, the Intralinks report says. Asia Pacific is set to benefit from foreign buyers looking for exposure to high growth in emerging markets.

The report predicts future M&A volumes by tracking deals that are in the early stages or have reached due diligence, and which are typically about six months away from being announced.

"Overall, confidence in the dealmaking and investor community remains high, so expectations for a strong close to 2015 seem reasonable," said Philip Whitchelo, Intralinks' vice president of strategy and product marketing.

Valuations are also forecast to rise to a new high after reaching an average of 16.5 times earnings before interest, tax, depreciation, and amortization in the U.S. during the first half, according to Intralinks.

Still, companies are pursuing big deals. The 37 per cent rise in M&A values in the six months through June included 31 deals of more than US$10 billion, the most mega deals ever in a first half, according to EY.

The second half of 2015 should continue to yield large transactions, with deal-making intentions among global executives at a five-year high. More than 50 per cent of executives surveyed for EY's Global Confidence Barometer are planning to pursue acquisitions in the next 12 months.

"M&A as a route to growth is firmly back on the boardroom agenda," said Pip McCrostie, EY's global vice chair of transaction advisory services, based in London.