The Canadian Press - ONLINE EDITION

As global economy recovers, corporate deal values reach highest level since 2007

  • Print

LONDON - More "headline-grabbing" acquisitions are likely over the coming year as businesses take advantage of a period of improving economic growth and cheap financing.

That's the conclusion of business consulting firm EY, which says the value of takeover deals announced in the first half of 2014 struck its highest level since the end of the boom years in 2007.

In its half-yearly update of corporate activity, EY said Thursday that the value of deals rose by 50 per cent from the same period the year before, to $1.7 trillion. Not since the global financial crisis first erupted, prompting companies to batten down the hatches, has the value of deals been that high.

For years, big mergers and acquisitions have been notable for their absence as companies stocked up on cash reserves to weather the global economic storms. Pursuing M&A was very much a secondary consideration for boards round the world.

The latest EY figures confirm change is afoot. From the planned $67 billion tie-up between Comcast and Time Warner, and AT&T's $67 billion deal with DirecTV to Valeant Pharmaceuticals' $55 billion hostile approach for botox maker Allergan, the last few months have seen a flurry of high-value corporate activity. Facebook even announced its biggest ever acquisition with a proposed $19 billion takeover of WhatsApp.

EY, which sourced data from Dealogic, said the next 6 to 12 months should continue to provide the "ideal window of opportunity" for businesses to pursue more deals. It said high equity valuations, low interest rates and cheap debt, as well as high cash levels built up during the years of retrenchment, have provided a favourable environment for deal-making.

Those favourable conditions may fade as major central banks start raising interest rates as the global recovery gathers pace. In the U.S., expectations are for rates to start rising in 2015, potentially increasing the cost of financing deals.

"Leading companies will look to do smart and strategic M&A before the current deal climate changes, so we can expect more large, headline-grabbing acquisitions to come," said Pip McCrostie, EY's global head of M&A.

Though high in value, EY said the number of mergers and acquisitions remains low, with businesses seemingly looking for big, transformative deals.

Most of the M&A deal-making is happening in developed economies, such as the U.S., Britain and France, as executives think they are less risky options now that their economies are growing again. Though U.S. economic growth suffered a big setback in the first quarter due to bad weather, it's poised to grow relatively strongly over the rest of the year. And the 18-country eurozone is growing consistently, albeit at a modest pace.

"Emerging high-growth and frontier markets will always be attractive in terms of investment, but safe and secure modest growth is attracting the most investment as the global economy moves into a new phase," said McCrostie.

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Winnipeg Cheapskate: Is that warranty worth it?

View more like this

Photo Store Gallery

  • RUTH BONNEVILLE / WINNIPEG FREE PRESS June 23, 2011 Local - A Monarch butterfly is perched on a flower  in the newly opened Butterfly Garden in Assiniboine Park Thursday morning.
  • PHIL HOSSACK / WINNIPEG FREE PRESS 070619 LIGHTNING ILLUMINATES AN ABANDONED GRAIN ELEVATOR IN THE VILLAGE OF SANFORD ABOUT 10PM TUESDAY NIGHT AS A LINE OF THUNDERSTORMS PASSED NEAR WINNIPEG JUST TO THE NORTH OF THIS  SITE.

View More Gallery Photos

Poll

What do you think of the new school-zone speed limit?

View Results

View Related Story

Ads by Google