2013: Year of the mega deal
Analysts have been calling for a surge in M&A for years now due to cheap financing rates.
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.
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.
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The company has made at least 4 acquisitions in the space, and few people have paid any attention.
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