‘Unsolicited Takeovers’ Make Up Significant Portion of M&A Activity in 2017

At a global level, mergers and acquisitions (M&A) heightened in 2017 with a recurring approach from nearly 80% of buyers who initiated company sales rather than go after companies that were for sale.

Michael Carr, Goldman Sachs Group’s global co-head of M&A, said the significant majority of buyers approached target companies in 2017 in an “unsolicited takeover,” according to CNBC. Preliminary Thomson Reuters data showed that M&A reached $3.54 trillion last year, falling just shy of the $3.59 trillion in 2016.

In 2017, M&A were recorded at the third-highest annual level since the financial crisis in 2008, and peaked in 2015 at $4.22 trillion. The steady outcome was credited to CEOs’ latest approach, which also included companies that refused to engage with interested buyers.

"Some of this is driven by buyers who believe they will not face competition,” Carr said, “which encourages them to aggressively pressure their targets confidentially with the implied threat that they will go public.”

Stephen Arcano, an M&A partner at law firm Skadden, Arps, Slate, Meagher & Flom, said buyers’ stock was frequently used in last year’s acquisitions.

"We are seeing a stock component becoming a bigger portion of the offers being made, perhaps because the deals are bigger and transformative, and acquirers are looking to offer targets additional upside in these transactions," Arcano said.

Buyout firms also used funds from investors in M&A through private equity, which rose 27% last year and reached $322.6 billion on a global scale. Following the passage in U.S. tax changes, CNBC reports that companies can allocate more cash to M&A.

The dealmaking tactic has reared its head over the past three years, with geopolitics having little impact on overall M&A, CNBC said.

Thomson Reuters data shows Europe and Asia-Pacific with an upswing of 16% and 11 %, respectively, bringing M&A in Europe to $856 billion and those in Asia-Pacific to $912 billion. Billion-dollar acquisitions in the U.S., such as CVS Health buying health insurer Aetna and Walt Disney buying Twenty-First Century Fox film and television businesses, could not prevent the year-on-year 16% decline in M&A to $1.4 trillion in 2017.

–Andrew Michaels, editorial associate

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