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* Market volatility a risk to M&A in second half
* Strategic deals by cash-rich companies still seen
* M&A could jump after Labor Day if markets calm down
By Paritosh Bansal and Megan Davies
NEW YORK, Aug 15 Dealmakers are worried about
market volatility and its impact on mergers and acquisitions in
the second half of the year, drawing little solace from a spate
of transactions announced on Monday.
Google Inc (GOOG.O) surprised the market with its largest
deal to date, a $12.5 billion acquisition of phone hardware
maker Motorola Mobility Holdings Inc (MMI.N).
Other deals included Time Warner Cable Inc's TWC.N
purchase of Carlyle Group's [CYL.UL] cable operator, Insight
Communications, for $3 billion, Cargill Inc's [CARG.UL] deal to
buy animal feeds producer Provimi from private equity firm
Permira for 1.5 billion euros ($2.1 billion) and Transocean
Ltd's RIGN.VX $1.43 billion bid for Aker Drilling ASA
The spurt of deals lifted the stock market and gave bankers
and lawyers some optimism M&A will not be derailed by last
week's market gyrations, but they said volatility remains a big
risk to dealmaking.
These deals were likely in the works for some time,
dealmakers said, adding that for every deal announced, many
fell by the wayside in the past few days.
"Given the recent volatility and pull-back in the financing
markets, there undoubtedly has been an impact on the M&A
markets," said Ehren Stenzler, co-head of U.S. M&A at UBS AG
UBSN.VX. UBS advised Insight on its sale to Time Warner and
Virgin Media Inc VMED.O on the sale of its stake in UKTV to
Scripps Networks Interactive Inc SNI.N.
"Despite a busy Monday morning -- these market dynamics
clearly aren't helpful for getting deals done generally,"
Stenzler said. "However, despite the volatility, for deals that
are strategic they can and will still get done."
Jeffrey Raich, a founding partner at Moelis & Co, added:
"If we see volatility go down I do think that, post Labor Day,
we will see a surge in M&A activity."
M&A volume has blasted past 2010 thanks to the surge in
transactions in the first few months of the year. Deal volume
is up 31 percent so far this year worldwide to $1.79 trillion,
compared with $1.37 trillion the same period a year ago. U.S.
deal volume alone is up 76 percent.
Deals are being stoked by companies' cash balances
remaining high, the continuing availability of cheap debt for
corporations with good credit, a narrowing valuation gap
between buyers and sellers and a search for growth by companies
in a weak economy.
"This year is clearly a better year for M&A than last
year," said Frank Aquila, M&A lawyer at Sullivan & Cromwell.
"(All the) fundamentals are there for a strong M&A market and
that will continue and nothing that has happened over the last
10 days really changes those fundamentals."
But wild swings in stock markets and a pull-back in
financing in the last few days has given a lot of chief
executives and their boards a pause, dealmakers said.
Many companies in the early stages of deal talks have
pulled back, sometimes to buy back stock as the markets
They are also waiting to ride out the traditionally slow
summer month of August and see how the market behaves after
Labor Day in September before restarting any talks for deals,
"If you had a deal that was in the works and it was still
early to middle stages, chances are that's gone on hold," said
David DeNunzio, vice chairman of Credit Suisse's CSGN.VX M&A
group. "Most people are saying, 'Let's give it 30 or 60 days
and see where the markets settle out and where we are.'
"If you had a deal that was real close, most people are
going to try to push those through. Those kinds of deals will
forge through, but they will be fewer and far between."
(Reporting by Megan Davies and Paritosh Bansal; editing by