2013: Year of the mega deal

Analysts have been calling for a surge in M&A for years now due to cheap financing rates.

By Benzinga Feb 15, 2013 12:39PM
Handshake CorbisBy Matthew Kanterman

Just one and a half months into the new year and it already appears as though 2013 will be a year of a mergers and acquisitions boom.

However, now that the equity prices have risen to new multiyear highs, sellers are beginning to feel more confident that they are not selling at bargain basement prices. As long as prices remain strong and financing cheap, 2013 could very well be the year of the mega deal.

Already the 10 biggest deals this year have totaled nearly $90 billion. In 2012, the 10 biggest deals totaled a mere $71.25 billion, indicating that 2013 is ready to smash 2012.

The biggest deal this year is Warren Buffett's Berkshire Hathaway (BRK.A) (BRK.B) buying H.J. Heinz Company (HNZ) for some $28 billion.

Buffet's purchase of Heinz was not a normal deal for the Oracle of Omaha. He partnered with private equity firm 3G Partners in the deal, and unlike many of his purchases, the deal involved a significant amount of leverage. Buffett's move into debt financing for acquisitions is a sign of the true underlying strength of the M&A market, especially as he is one of the more conservative investors in the market who rarely likes to use leverage in buyouts.

So far through just one and a half months of 2013, the top 10 deals are:
  • H.J. Heinz is being sold to Berkshire Hathaway and 3G Partners for $28 billion.
  • Dell (DELL) is in final discussions to go private in a $24.4 billion management buyout.
  • Virgin Media (VMED) was sold to Liberty Global (LBTYA) for $23.3 billion.
  • Copano Energy (CPNO) was sold to Kinder Morgan Energy Partners (KMP) for $5 billion.
  • Acme Packet (APKT) was sold to Oracle (ORCL) for $2.1 billion.
  • Metals USA Holdings (MUSA) was sold to Reliance Steel (RS) for $1.2 billion.
  • Crexus Investment Corp. (CXS) was sold to Annaly Capital Management (NLY) for $996 million.
  • MAP Pharmaceuticals (MAPP) was sold to Allergan (AGN) for $958 million.
  • Zipcar (ZIP) was sold to Avis Budget Group (CAR) for $500 million.
Among those 10 deals are the three mega deals already to have taken place this year. With cheap financing, high equity prices (meaning an increased willingness for owners to sell) and a healthy M&A market, more deals could come.

One notable deal that has been rumored for nearly one year is the management buyout of Best Buy (BBY). Over the summer, sources thought a deal was close only for discussions to break down.

It is important to note that the recently announced management buyout of Dell is not closed yet and is facing much shareholder rebuffs. Notable activist investor Southeastern Asset Management said it would vote its shares against the deal and other institutional shareholders have joined the chorus of those against the deal in recent weeks. The final vote will determine whether the deal goes through.

It should also be pointed out that added to the list of acquisitions should be the merger of American Airlines (AAMRQ) and US Airways (LCC), which together create the largest airline in the U.S.

Once again, the cheap financing, the good selling prices and a healthy M&A market should make 2013 the year of the mega deal. So grab your popcorn, because this is going to be one heck of a show.

More from Benzinga
Feb 17, 2013 8:50AM
It likely is the Year of the Mega-Deal and due fully to corrupt financiers like Goldman Sachs and JP Morgan Chase's hand in the honey pot. You know... if ANYONE WITH A BRAIN was heading up the Federal Reserve... the BANK RATE would be at least 12% and the SEC would cap M&A commision rates at .25% or $100 whichever is lower. It would force currency out of the corporate coffers and do wonders for actual America. Deals used to be business-related, now they are just financier-created without purpose. The wisest move America could make today is to put a "OUT OF BUSINESS" sign on Wall Street and start from scratch rebuilding ourselves. Remember kids, IF we ever recover, these pariah will own us. Are you really ready for a bastard master?
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