2018 Could Be "The Year Of M&A"

2017 was a good year, but not a great year, for global mergers and acquisition (M&A) activity as global M&A fell just short of 2016 results with a 3.2% decline in value according to Mergermarket. 2018, on the other hand, has started off great with a series of large M&A announcements. According to Thomson Reuters, there have been 11 transactions over $5 billion, totaling $94 billion thus far, making it the largest January total for deals over $5 billion on record – already! Furthermore, Bloomberg reported that 2018 has marked the best start for overall global M&A activity, with total volume of $224 billion thus far in January, since 2000. Some of the M&A transactions in January 2018 include:


Source: Thomson Reuters Deals Intelligence as of January 22, 2018. Figures include both announced and completed transactions.

So what is causing all of the heightened activity in the M&A space during the initial weeks of the New Year? From our perspective, there are a variety of reasons including, but not limited to, the following:

• Business confidence and optimism
• Excess cash on corporate balance sheets
• Relative stability of U.S. and global economies
• U.S. corporate tax cut from 35% to 21%
• Repatriation provisions of recently enacted U.S. tax plan

With respect to the last point above, the repatriation provisions of the new tax act will likely bring more cash back onto the balance sheets of certain U.S. multi-national companies. To this end, Apple recently announced plans to repatriate the vast majority of its $252 billion in cash held overseas. One potential use of any excess cash repatriated by U.S. corporations, in general, would be mergers and acquisitions and potential M&A targets may be in the areas of technology and biotechnology considering that technology and healthcare account for 85% of total S&P 500 untaxed cash overseas according to an Emily Stewart article on TheStreet.com entitled, “20 Companies Goldman Sachs Thinks Will Be Huge Winners from Trump’s Big Tax Plan.” 
With respect to biotechnology, we believe that some larger pharmaceutical companies benefiting from repatriation may consider acquiring attractive biotech companies for some of the following reasons:

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Disclosure: Hennion & Walsh Asset Management currently has allocations within its managed money program and Hennion & Walsh currently has allocations within certain SmartTrust® Unit ...

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