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LONDON - A global mergers and acquisitions boom is under way that is expected to smash previous records, with deals so far this year valued at nearly £1 trillion ($2.71 trillion), almost double the figure recorded during the same period last year.
The data comes from Thomson Financial,
which is involved in the corporate feeding frenzy via a putative bid for news and financial information group Reuters worth £8 billion.
Elsewhere, Microsoft is plotting a US$50 billion takeover of Yahoo as a way of competing with Google and has hired investment bank Goldman Sachs to advise on a transaction that would see its share of the American global search market jump to 35 per cent against Google's 53 per cent.
Speculation that a deal could be close was fuelled by the revelation that Yahoo's chief executive, Terry Semel, is attending an advertising summit organised by Microsoft in Seattle this week, where he is expected to meet founder Bill Gates.
In London, investment bankers said their deal pipelines were about 50 per cent ahead of this time last year. This means that 2007 will be a record year for mergers and acquisitions, with the estimated value of transactions as high as £2 trillion, far more than during the dotcom boom.
Media companies are at the centre of bid fever after an offer from Rupert Murdoch's News Corporation for Dow Jones, owner of the Wall Street Journal, and confirmation from EMI that it has received several preliminary offers, believed to be from private equity groups. However, Murdoch must first win over the Dow's controlling shareholder, the Bancroft family.
There is action in other sectors too: Franco-Spanish tobacco company Altardis is expecting an offer from private equity groups PAI and CVC. Rival suitor Imperial Tobacco must decide whether to sweeten its terms.
Analysts said the upswing in deals, which has seen Alliance Boots agree to an £11 billion deal from KKR, is down to several factors. A broker says: "Private equity is still awash with cash; debt is still relatively cheap, while the rise in stock prices reinforces confidence as companies are prepared to use their shares as currency to buy growth by acquiring their competitors."
A recent report from accountancy firm KPMG showed that over the next three years the FTSE-350 would generate £200 billion of surplus cash.
"That leaves many chief executives facing the choice of becoming either predator or prey," says a banker.
The deal that is likely to be agreed first is one between Reuters and Thomson Financial, the Canadian company that is quoted in Toronto and valued at about £14 billion. The Reuters board, led by chief executive Tom Glocer and chairman Niall FitzGerald, is understood to be keen to reach an agreement; analysts expect the Canadians to offer between 600p and 700p a share.
But one Reuters shareholder with a significant stake thought that Glocer should hold out for 750p. The institution said: "Heavy capital expenditure at Reuters will shortly fall away, leaving a company that is almost debt-free. Reuters is a great British brand; it would be wrong to sell it on the cheap."
Although bankers expect a deal between Reuters and Thomson to be thrashed out in the next two or three weeks, the Canadians face a problem in that they may not be able to offer the entire consideration in cash.
Nevertheless, a deal may be clinched via a dual listing structure that gives the company a quote in London and Canada. Glocer, who stands to collect at least £25 million under a "change of control" agreement in his contract, is not expected to leave in the near term.
An observer says: "He has done a magnificent job turning round the company - don't forget Reuters recorded its first ever loss in 2002."
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