(Removes incorrect description of Smith & Nephew as private
By Anjuli Davies and Sophie Sassard
LONDON, Sept 4 Verizon's deal to buy Vodafone
out of their U.S. wireless venture for $130 billion may have
been years in the making, but bankers hope it could be an
inflexion point that marks the revival of big dealmaking.
The telecoms deal, the third-biggest takeover on record,
crowns a string of transactions this summer that the bankers say
could boost boards' confidence that the time is right to pursue
"This has been a great summer to remember," said Hernan
Cristerna, global co-head of M&A at JP Morgan, which advised
Verizon and also helped Nokia with its
decision to sell its mobile phone business to Microsoft
, announced on Tuesday.
"We have to be slightly cautious, but what these deals
signal is that there's a shift in sentiment. We're changing
gears in the M&A mindset."
In the wake of the 2007-09 financial crisis, dealmaking
declined and executives shied away from large leveraged
transactions, cutting debt instead and slimming down to their
core businesses through asset disposals. Big became synonymous
with greater risk and lower performance.
After a slow start, the summer's activity has pushed global
M&A activity across all sectors to $1.55 trillion so far this
year, up 1 percent on the same period last year.
The telecoms, media and technology (TMT) sector has led the
"This could be the beginning of a big wave of M&A in the TMT
sector; we are beginning to see a shifting of the telco tectonic
plates globally," said Eric Benedict, Co-Head TMT at
AlixPartners in London.
"There has been a lot of action in the U.S., but more could
start happening in Europe," said Benedict.
TMT was already the biggest contributor to M&A activity in
the first half of 2013, and Vodafone-Verizon has taken the total
to $447.9 billion, more than two thirds higher than last year
and making 2013 the best year for TMT dealmaking since 2007,
according to Thomson Reuters data.
"There are really punchy, 'life's great' sort of deals going
on, but they're really sector specific," said Tom Massey, head
of European M&A at Citi.
"But like in past cycles, once one domino goes, the rest
Data also show reasons for optimism, with 15 deals above $10
billion so far this year, the highest number since 2009,
according to Thomson Reuters data.
"The acid test for the M&A market is beyond the natural
evolutions of add-ons. It's about seeing M&A used to transform
rather than just add on or peel off," said Cristerna.
Bankers say companies and their shareholders are warming to
more weather-changing deals.
"Companies are dusting off some deals they have been
studying for a long time. In addition to divestiture of non-core
assets and bolt-on acquisitions, CEOs are starting to look at
large industry-transforming strategic transactions," said
Gilberto Pozzi, head of European M&A at Goldman Sachs.
The acquisition of Telecom Italia is among the
long-expected deals that could soon happen, as the firm is being
circled by potential investors including China's Hutchison
Whampoa and Egyptian media tycoon Naguib Sawiris,
In the UK, the owners of mobile operator EE could also sell
it to leveraged buyout funds or trade players like AT&T in
what would be a 10-12 billion pound ($16-20 billion) deal,
Long-flagged sizeable takeover targets in the pharmaceutical
field such as Shire, AstraZeneca and Smith &
Nephew could also change hands.
Buoyant financing markets could facilitate larger
transactions and encourage some to take companies back into
private hands, deals that have been largely confined to the
United States, with Dell, Virgin and Heinz, say the bankers.
"The level of M&A activity seen to date has not sated the
demand for acquisition-related loan deals from loan investors,"
said Charlotte Conlan, head of loan syndications for EMEA at BNP
"Bank liquidity remains deep, easy to access and flexible
for the right deal. The much-talked-about M&A uptick is what the
loan market is looking for."
Industrials conglomerates such as Smiths Group and
consumer group Reckitt Benckiser are also on bankers'
radar as possible break-up candidates.
With the Vodafone-Verizon announcement, 2013 would be the
best year for mega-deals - those over $50 billion - since 2008,
according to TR data. There have been only seven such deals
"This could be kicking off broader M&A activity in other
sectors. Everybody will be pitching like crazy. Mega-deals are
outliers, though; the universe of possible mega-deals is
limited, and they're what people remember, but the vast majority
of deals that take place are in the $1-5 billion bracket. 2013
could be the year that kicked it all off," said Massey.
Ultimately, CEOs need to pull the trigger, and that could be
as much about psychology as funding or commercial logic.
"Will people be bold enough to do transformational deals?
That's very specific to particular companies, but it's easier to
do when there is an encouraging environment," said Mark Warham,
head of M&A for EMEA at Barclays.
($1 = 0.6439 British pounds)
(Additional reporting by Tessa Walsh; Editing by Will Waterman)