A series of blockbuster deals has led a resurgence in M&A activity since the start of July, with companies rushing to prepare themselves for the recession and dusting off deals that were shelved because of the pandemic.
Eight deals of more than US$10 billion ($15.1b) have been signed in the past six weeks, according to Refinitiv data, making it the fastest start to the second half for megadeals since 2007 when there was an M&A boom before the financial crisis.
The list of deals includes the US$21b sale of Marathon Petroleum's Speedway petrol stations business to Seven & i Holdings, the Japanese owner of the 7-Eleven convenience store chain. It also includes Analog Devices' US$20b deal to buy rival chipmaker Maxim Integrated Products.
"This is pretty extraordinary with respect to how this bounceback has happened," said Michael Carr, co-head of global M&A at Goldman Sachs.
The coronavirus pandemic brought a six-year-long dealmaking boom to a halt. Corporate leaders put transactions on hold to concentrate on shoring up operations, while activist investors kept a low profile in fear of a backlash if they pushed for changes in the midst of a health crisis.
As share prices have recovered, many of those deals contemplated earlier this year are back on track.
Monthly Refinitiv data show June and July each registered more than US$300b in overall M&A activity, compared with US$100b in April and US$130b in May.
"The backlog is very busy and I would expect things to continue, barring a major event that brings things to a halt," said Alison Harding-Jones, head of M&A for Europe, the Middle East and Africa at Citigroup.
"The kind of transactions we expect to see are big strategic takeovers, share-for-share deals among companies in the hardest-hit industries and an increasing number of private equity bids," she said.
Some companies are looking to strike deals that will help them weather tougher economic climate, said Nestor Paz-Galindo, global co-head of M&A at UBS.
"People are thinking about how to build scale and resilience, and that is a driver of M&A," he said. All-stock deals that "you would never have done" when share prices tumbled in April have become easier since stocks have bounced back.
Most of the largest deals involved US-based companies. The biggest European-led deal was German group Siemens Healthineers' US$16.4b agreement to buy US-based Varian Medical Systems, which makes devices for cancer treatments.
Blair Effron, co-founder of Centerview Partners, was more cautious. "The issue right now is that the ability to get comfortable enough to make a big bet in a non face to face environment has shrunk," said Effron.
"Transformational deals will pick up as the health crisis recedes." he added.
While big deals have recovered, the pandemic derailed several major transactions agreed before the crisis. Others are in trouble, such as the planned €10.7bn takeover of Dutch diagnostics group Qiagen by its larger US-based rival Thermo Fisher.
Thermo Fisher needs support from two-thirds of Qiagen's investors by Monday evening to seal the deal. But a series of hedge funds are holding out from voting their shares in favour of the deal, arguing that demand for Qiagen's Covid-19 research test kits means that Thermo Fisher's offer undervalues the company.
Written by:Ortenca Aliaj, Kaye Wiggins, James Fontanella-Khan and Arash Massoudi
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