Merger Mania: Deals to Keep Flowing $1.1 Trillion Of Cash On Sidelines Says Barrons
Barrons
SATURDAY, FEBRUARY 16, 2013
Merger Mania: Deals to Keep Flowing
By ROBIN GOLDWYN BLUMENTHAL
The fast start of the current year in M&A activity should continue, with S&P 500 nonfinancial companies sitting on $1.1 trillion of cash and investments.
Mergers and acquisitions have been on a tear, and judging by the $1.1 trillion of cash and short-term investments held by nonfinancial companies in the Standard & Poor's 500, the beat is likely to go on.
About two-thirds of this money is in information technology, industrials, and health care, according to S&P Capital IQ. Indeed, of the $185.3 billion in deals announced so far this year through Feb. 14, IT accounted for $33.4 billion, close behind consumer staples, at $33.8 billion. Consumer discretionary led the pack, at $52.5 billion, while health care contributed $9.0 billion, and industrials, $5.6 billion.
Enlarge Image
William Waitzman for Barron's
Cash-Rich: Companies that are sitting on $1.1 trillion of cash piles are starting to use it to make the most deals since 2005.
Just $58.1 billion of deals were announced in the corresponding year-earlier stretch.
In fact, this year's early M&A pace is the most torrid since 2005, before the financial crisis. And the surge is far from over. "Companies are looking to buy growth," observes Richard Peterson, an S&P Capital IQ director. He says that at least a dozen $1 billion-plus transactions have been announced already in 2013. Among them: The $23.3 billion buyout of H.J. Heinz (ticker: HNZ) by Warren Buffett and 3G Capital, and Comcast's (CMCSA) $16.7 billion deal for 49% of NBCUniversal. And Dell's (DELL) $24.4 billion plan to take itself private is also swelling the numbers.
"There are a lot of private-equity dollars sloshing around," says Joe Steger, head of global tech M&A at Ernst & Young. If favorable trends continue in leverage, "it should help give people a reason to do deals."