Businesses spent $1.74 trillion on mergers and acquisitions involving U.S. companies during the first six months of the year—the highest amount in more than four decades—as finance chiefs tapped into cheap funding options to acquire technologies, services and other assets.
Such transactions surged in value in the first six months of the year, up from $511.79 billion during the year-ago period and $1.28 trillion in the first six months of 2019, before the pandemic, according to data provider Refinitiv, which began tracking deals in 1980. The total number of deals with U.S. involvement, at 9,725, also was higher than in comparable periods in 2020 and 2019, Refinitiv said.
U.S. companies are cash-rich thanks to last year’s emergency fundraising rounds and strong earnings in recent quarters, providing chief financial officers with money to fill gaps in their portfolios. Also, consumer behavior and market patterns have changed during the pandemic, forcing businesses to accelerate their transformation strategies.
Under pressure to meet high expectations from investors, many companies are taking the faster route to grow their business through acquisitions instead of focusing on organic growth alone. The recent surge comes after deal making slowed to a trickle last spring after coronavirus restrictions took hold, before picking up later in the fall.
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“The market is clearly hot,” said Luca Zaramella, the chief financial officer of snack-foods maker Mondelez International Inc., which in May agreed to spend about $2 billion on Chipita SA, a European snacking company. Mondelez plans to finance the transaction with new debt, existing cash and $1 billion it received after selling down part of its stake in Keurig Dr Pepper Inc.
“The cost of capital is pretty compelling,” Mr. Zaramella said. The pandemic delayed the companies’ negotiations. “I feel more comfortable having taken the time,” he said.
Companies struck more deals valued at more than $1 billion than in the prior-year period and in the first six months of 2019, according to Refinitiv. Those transactions include Microsoft Corp.’s purchase of artificial-intelligence firm Nuance Communications Inc. for $16 billion; AT&T Inc.’s agreement to merge its WarnerMedia business with Discovery Inc. ; and Visa Inc.’s deal to acquire Swedish payments provider Tink for $2 billion.
Ticker | Security | Last | Change | Change % |
---|---|---|---|---|
MDLZ | MONDELEZ INTERNATIONAL, INC. | 62.60 | +0.13 | +0.21% |
MSFT | MICROSOFT CORP. | 277.65 | +6.05 | +2.23% |
T | AT&T, INC. | 29.23 | +0.12 | +0.41% |
V | VISA, INC. | 238.63 | +3.48 | +1.48% |
“There has probably never been easier access to capital,” said Brian Salsberg, global head of the integration practice at professional services firm Ernst &…
Read More: Cash-laden companies are on a mergers and acquisitions spree