Corporate deal-making driven by fast technological change
LONDON — The appetite for mergers and acquisitions remains near a record high as firms try to adapt to fast technological changes and despite a welter of geopolitical concerns, a survey of executives found Monday.
In its half-yearly report of mergers and acquisitions, or M&A, consulting firm EY found that 56 percent of firms are planning a deal within the next 12 months. That’s unchanged from the previous survey in April but way above the survey’s long-run average.
The survey shows that the high degree of potential M&A activity runs parallel to rising expectations over the state of the world economy, with all major economies growing in sync. A staggering 99 percent of global executives believe the M&A market will improve or remain stable this year.
Since a lull following the global financial crisis, when firms opted for a safety-first approach, M&A has become increasingly popular, with many companies opting to use their cash reserves to make deals, particularly in the field of financial technology.
Among the big deals announced this year are Johnson & Johnson’s $30 billion takeover of Swiss pharmaceutical firm Actelion and United Technologies’ plan to buy Rockwell Collins for about $23 billion. Other high-profile deals include Amazon’s $14 billion takeover of Whole Foods and Gilead’s $12 billion acquisition of Kite Pharma. Meanwhile, U.S. drugstore chain CVS Health Corp. is reportedly in talks to buy the country’s thirdlargest health insurer, Aetna Inc., in a deal that could be worth more than $60 billion.
One particularly bright spot in both the global economy and in M&A is the 19-country eurozone, where the economy has gained momentum as concerns waned over the bloc’s future following years of crisis.
Steve Krouskos, EY’s global head of transactions, said the main motivation behind the high interest in deals is the need for firms to equip themselves for the future, particularly in digital technologies, which are forcing rapid change in many sectors. That means a large proportion of deals will be smaller-scale in nature and not the blockbuster ones.
“Deals are a necessary part of the tool-kit,” Krouskos said.
He added that the need to adapt to technological innovation “overrides geopolitical concerns,” which range from worries over North Korea’s nuclear ambitions to President Donald Trump’s intentions to renegotiate trade deals and Britain’s upcoming exit from the European Union.
The survey, which was based on interviews with nearly 3,000 executives across 43 countries and across sectors, also found that half of companies expect private equity to become more involved in M&A.
NEW YORK — Vistra Energy and Dynegy will join in an all-stock deal to create a power company with 2.7 million residential and 240,000 industrial customers.
Dynegy shareholders will receive 0.652 shares of Vistra stock for each Dynegy share. Vistra shareholders will hold 79 percent of the combined company. Based on Vistra’s closing price of
HERNDON, Va. — Strayer Education is teaming up with Capella Education in a deal worth about $1.9 billion under an administration that looks much more favorably at nonprofit schools that had come under a harsher spotlight in $20.30 last Friday, Dynegy shareholders will get $13.24 per share.
Dynegy, of Houston, has 1.2 million customers and employs 2,400 people. Vistra has about 4,500 employees and operates Luminant and TXU Energy, which sells electricity to about 1.7 million customers in Texas.
The company, which will keep Vistra’s Irving, Texas, headquarters, will have a market capitalization of more than $10 billion. recent years.
The two schools, however, stood out from others mired in inquiries about students left with large debts and limited prospects. Strayer University and Capella University will continue to run as independent institutions with separate boards.