M&A Deal‐Makers Are Dealing in 2014: A Commentary

AuthorJames B. Edwards
Published date01 January 2015
DOIhttp://doi.org/10.1002/jcaf.22015
Date01 January 2015
19
© 2015 Wiley Periodicals, Inc.
Published online in Wiley Online Library (wileyonlinelibrary.com).
DOI 10.1002/jcaf.22015
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James B. Edwards
A stampede of merger and acquisition (M&A)
transactions took place during the first six months
of 2014. Whether this means growth ahead or irra-
tionality remains to be seen. What hasn’t changed
is that the true measure of M&A activities will
always be measured by the resulting economic
growth. The game of “musical chairs” serves best
when it leads to increased productivity and new
jobs. When it creates some degree of monopoly
and restraint on the consumer, it’s bad news for
our economic well-being. © 2015 Wiley Periodicals, Inc.
M &A Deal-Makers Are Dealing in 2014:
A Commentary
The first half of
2014 experienced
a significant
surge in merger and
acquisition (M&A)
activity. Through July
2014, $2.2 trillion U.S.
dollars in deals were
announced globally,
according to data from
Thomson Reuters.
That total worldwide
amount represents a
67% increase over the
same period last year.
Some experts believe that
this boom in M&A activities
will continue in spite of some
major failures. Others see it as a
temporary “black swan” event
that will not be sustained. The
black swan theory or theory
of black swan events is a meta-
phor that describes an event
that comes as a surprise, has a
major effect, and is often inap-
propriately rationalized after
the fact with the benefit of
hindsight.
Rupert Murdoch’s bid
for Time Warner and Sprint’s
attempt to buy T-Mobile appear
to have collapsed. The Sprint
effort to purchase T-Mobile was
derailed because of regulatory
obstacles.
At the top of the success
list, Comcast Corp. announced
a deal in February to acquire
Time Warner Cable, Inc. for
$70.7 billion. In May AT&T,
Inc. announced a deal to acquire
DirecTV, Inc. for $67.2 billion.
Other amounts in the upper tier
include $56.3 billion by Valeant
Pharmaceuticals Intl. for Aller-
gan, Inc.; $47.9 by Medtronic,
Inc., for Covidien, PLC; $47.6
billion by AbbVie, Inc. for
Shire, PLC; and $44.5 billion by
China’s CITIC Pacific for the
main assets of CITIC Group, its
state-owned parent (all amounts
in billions of U.S.
dollars). The num-
ber of announced
deals exceeding $10
billion during the
first six months in
2014 showed a total
of 19 deals com-
pared to 9 deals dur-
ing the same period
in 2013. These new
deals suggest some-
thing bigger than
mere realignments.
There appears
to be a variety of opinions in
regards to the reasons and the
effects of this surge in M&A
activity. Some see the current
pace and magnitude of growth
in M&A deals as an indicator
that the U.S. economy is poised
to climb out of the doldrums
that followed the financial crisis
of 2008, which held the level
of M&A deals relatively low
from 2008 to 2013. “There’s
less talk of a double-dip reces-
sion or systemic failure,
1 Chris
Ventresca, a global co-head of
mergers and acquisitions for
JPMorgan Chase, said, “so an
M&A deal feels less risky than
it did until quite recently.”
2

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