* M&A activity up 0.8 pct in first 9 months of 2013
* Goldman Sachs top adviser worldwide so far in 2013
* U.S. M&A up 35 pct, Europe down 24 pct, Asia dropped 8 pct
By Michael Erman and Soyoung Kim
NEW YORK, Sept 26 Dealmaking around the world
was basically flat over the first nine months of the year, a
disappointing level given the $130 billion Verizon
Communications Inc transaction that bolstered mergers and
acquisition volumes in the third quarter.
With ongoing uncertainty about economic recoveries around
the globe, the specter of rising interest rates as well as
increasingly activist investors clamoring for a return of
capital to shareholders, top investment bankers and lawyers do
not expect a significant pickup in deal activity soon.
"Between increased rates, and, at times, unpredictable
deal-approval regulatory framework, and continued debt ceiling
issues, we're back in the annual dance of uncertainty," said
Paul Parker, head of global corporate finance and M&A at
"The silver lining is that the Fed has made it clear that
they're not going to pull back on easing near-term. And
therefore, companies probably do have a window to take advantage
of the rate environment which is still historically low," he
Some companies have been taking advantage of cheap financing
to make cash bids. Verizon's mammoth deal to buy Vodafone Group
out of its U.S. wireless business, history's third
largest corporate deal announcement, illustrates this trend.
The conventional wisdom that the U.S. Federal Reserve might
taper its bond buying, which would have resulted in higher
interest rates, could have spurred some companies to do some of
these deals before the Fed's September meeting.
"The prospect of a taper seemed to crystallize for some
buyers the impact higher rates would have on the economics of
cash transactions," said Anthony Whittemore, co-head of mergers
& acquisitions for the Americas at Deutsche Bank.
Ironically, he said the possibility that the Fed may wait
months until a taper could lull some companies back into
"The Fed's decision to defer may have taken some of the
pressure off as buyers anticipate a longer period for the
current interest rate environment," Whittemore said.
Through Sept. 24, global deal volume rose 0.8 percent to
$1.67 trillion so far this year, up from $1.66 trillion a year
earlier, according to Thomson Reuters data. Excluding the
Verizon-Vodafone deal, global deal volume fell 7 percent to
The total number of deals so far this year has fallen 9.6
percent to 25,374.
"Boards and CEOs don't have great confidence in the economy
right now, they don't have confidence that we have a strong
recovery going on and that it's going to sustain itself," said
Scott Barshay, head of corporate department at law firm Cravath,
Swaine & Moore LLP.
UNEVEN GLOBAL RECOVERY
Goldman Sachs Group Inc was the top M&A adviser
worldwide, with $509.7 billion worth of deals over the period.
JPMorgan Chase & Co, Bank of America Merrill Lynch
, Morgan Stanley, and Barclays rounded
out the top five.
Deals in the Americas rose 18 percent to $910.9 billion, and
accounted for 54 percent of global dealmaking in 2013. The
United States performed particularly well, rising 35 percent
year over year, and the region would have seen a double digit
increase over the period even excluding the Verizon-Vodafone
"The M&A story is a little bit of a regional story where
activity is up disproportionately in the Americas, compared to
Europe and Asia Pacific," said Patrick Ramsey, co-head of
Americas M&A at Bank of America Merrill Lynch. "The big
difference is that the recovery here began earlier and is on
firmer footing than Europe overall."
Mergers and acquisitions fell 24 percent in Europe to $383.3
billion, although dealmakers say that for the first time in a
long time, clients in the region area showing a rebound in
sentiment. For instance, in addition to the Verizon deal,
Vodafone struck 7.7 billion euro deal to buy Kabel Deutschland
, and French ad agency Publicis $35 billion
merger with U.S. agency Omnicom.
"All things seem to point to a future increase of M&A
activity," said Gilberto Pozzi, head of M&A, for Europe, the
Middle East and Africa at Goldman Sachs.
"The conditions for healthy M&A are there, if people decide
to act on them is another question, but certainly in terms of
dialogues we're having they're as good as they've been in the
recent past," Pozzi said.
Deals in the Asia-Pacific region dipped 8 percent to $269
ACTIVISM ON THE RISE
An additional headwind facing many companies considering
large or complex deals is the prevalence of activist investors.
Dealmakers said they have recently spent more of their time
discussing activism and its defense with clients. Worries about
how shareholders might react to deals have delayed timing or
scuttled deals that would have been consummated previously, they
Indeed, in the United States, Michael Dell's $25 billion
offer to take Dell Inc private as well as the $4.7
billion offer for Smithfield Foods Inc by China's
Shuanghui International were challenged by activists
after they were announced.
"Directors today, in general, are doing an excellent job in
their oversight role, whereas 15-25 years ago there was much
more rubber stamping going on. The result of that though is that
management teams can be hesitant to bring deals to boards of
directors, unless they're perfect or near perfect," said
U.S. regulators are also complicating deals. The U.S.
Justice Department sued to block American Airlines
and US Airways' proposed merger in August after
squeezing concessions out of AB Inbev in its deal for Modelo
earlier this year, and a U.S. court halted Vivendi SA's
$8.2 billion deal to sell most of its stake in Activision
Blizzard Inc back to the videogame publisher earlier
"We're seeing more activism out of the antitrust regulators
and as a result, fewer deals are being pursued because of fear
that the regulators will just turn them down or demand too high
a price," Barshay said.
There were some bright spots: real estate and health care
deals rose 42 percent and 30 percent from last year,
respectively. Private equity-backed deals were up 16 percent
year over year with $238.2 billion of transactions, including
Berkshire Hathaway Inc and 3G Capital Partners' $27
billion takeover of HJ Heinz Co.
And deals over $5 billion rose 16 percent to $498.7 billion.
Bank of America's Ramsey said he believes the increase in
the largest deals foretells a pickup in coming quarters for M&A
activity in general.
"Overall deal activity is a good barometer of CEO and board
confidence, but big deal activity -- $10 billion and plus -- is
the best barometer of CEO and board confidence, and we've seen
more big deal announcements this year, year to date, than any
year since 2008, prior to the onset of the financial crisis," he