(Corrects spelling of last name to Aquila, in 12th paragraph)
By Michael Erman
NEW YORK Feb 14 U.S. merger and acquisitions
activity has surged in the first two months of the year, as
strong equity markets and cheap debt financing give chief
executives renewed confidence to pursue large takeovers that
they had shunned in past years.
An announcement Thursday that Warren Buffett's Berkshire
Hathaway would buy ketchup maker H.J. Heinz Co
was perhaps one of the most attention grabbing of $158.5 billion
of deals in the United States so far in 2013.
That is more than double the activity in the same period
last year and accounting for 57 percent of global deal volumes,
according to Thomson Reuters Deals Intelligence.
The strong showing in U.S. dealmaking contributed to a 16.5
percent rise in worldwide M&A volumes to $276.0 billion compared
to the same period a year ago. That marks the highest level
since the 2007 dealmaking heyday when global deal volumes
totaled $407.5 billion.
Thursday alone saw a bonanza of mega-deals; the $23 billion
takeover of Heinz by Berkshire Hathaway and Brazilian private
equity firm 3G Capital, the merger of American Airlines and US
Airways Group, and the revised $20 billion takeover of
Mexican brewer Grupo Modelo by Anheuser-Busch
Jim Woolery, co-head of North American mergers and
acquisitions at JPMorgan, said that all the ingredients
are in place for deal activity to pick up. Financing is cheap
and available, companies have cash on their balance sheets and
equities markets have improved.
"What we've lacked has really been conviction and confidence
at the c-suite level. With the election and the fiscal cliff,
there were headwinds that were pushing against folks acting
decisively," Woolery said. "Now, we've taken some of the
variables off the table."
JPMorgan has been the top M&A adviser so far in 2013. In the
past few weeks, the company has worked on nearly all of the big
announced deals including Heinz, Michael Dell and private equity
firm Silver Lake's $24.4 billion buyout offer for Dell Inc
, Comcast Corp 's $16.7 billion bid to buy the
rest of NBC Universal from General Electric and the $15.8
billion takeover of British cable group Virgin Media by
U.S. billionaire John Malone's Liberty Group.
Goldman Sachs Group and Bank of America Merrill Lynch
currently hold the second and third spots in the
worldwide league tables in 2013. Boutique investment bank
Centerview Partners is fourth.
Global transaction volumes only rose slightly last year as
uncertainty about the euro zone, the U.S. presidential election
and the fiscal deficit gave many CEOs and boards cold feet.
But with some of the major political events in the rear view
mirror, executives are showing more interest in considering
larger deals, say bankers and lawyers.
"There wasn't a lot of confidence last year. Today business
confidence is much higher, companies have a lot of cash as a
consequence of the cost cutting they did starting in '07 and
'08," said Frank Aquila, co-head of Sullivan & Cromwell's
general practice group.
"Now they need growth. In an environment where there is not
a lot of organic growth, they're looking towards M&A."
And dealmakers believe the momentum will keep up through
"It feels very much like an inflection point in the M&A
market," said John Huwiler, Global Head of M&A at Jefferies
Group. "Four blockbuster transactions announced in a short
period of time ...it's quite a mark of confidence that we think
is going to translate into an acceleration in the pace of
"It's the fundamental truth of the market - it's been true
for years. Deals beget more deals," said JPMorgan's Woolery.
(Additional reporting by Jessica Toonkel and Olivia Oran,
Editing by Soyoung Kim and Alden Bentley)