What’s Going On Here?Data out on Thursday showed that so-called “megadeals” – those worth over $10 billion – have kept the merger and acquisition (M&A) market in one piece this year. What Does This Mean?The value of global dealmaking hit its highest since records began last year, thanks to booming markets and government support that left businesses flush with cash. But what a difference a few months make: scandalous inflation, gung-ho interest rate hikes, and the outbreak of war have rattled investors and wiped out corporate confidence. That’s encouraged more and more companies to hoard cash, which is partly why the value of abandoned deals is the highest it’s been since before the pandemic. Then again, there has been one saving grace in the form of the 25 megadeals announced in the first half of the year. That’s 12% more than over the same period in 2021, and means the total value of dealmaking has only fallen short by around 20% (tweet this). Why Should I Care?Zooming in: All eyes on Twitter.
Some analysts see the reliance on megadeals as risky, given that their collapse – entirely possible in light of US regulators’ increasingly hardline approach – could take the entire M&A market down with them. They’re right to be nervous: Elon Musk has repeatedly threatened to walk away from his $44 billion Twitter deal, and chipmaker Broadcom will probably have to undergo lengthy investigations into its $69 billion bid for software provider VMware.
The bigger picture: Just you wait.
These megadeals have also benefited global investment banks – which earn a fee for dealmaking advisory services – at a time when revenue from their bond and stock trading segments has plummeted by 26% and 72%. But here’s the problem: dealmaking activity tends to trail overall stock market performance by a few months, and the stock market – you may have noticed – has been on a downward spiral. That suggests M&A activity will probably suffer soon too, and investment banks along with them. | 