Dealmakers in record $143 billion M&A rush before election
Dealmakers are in a record-breaking rush to get transactions done before what could be one of the most contentious U.S. presidential elections ever.
Companies have announced $143.1 billion of mergers and acquisitions globally in the past seven days, the highest for any week preceding a U.S. presidential vote since Bloomberg started collecting data. It’s more than double the tally for the lead-up to the 2016 election.
Deals have ranged from one of the chip industry’s biggest-ever transactions to a fast-food megadeal, with bankers scrambling to get things done before Americans head to the polls. They’re fearful that further volatility in the days after the election could scuttle carefully-laid plans for the next blockbuster merger.
Nerves have already been frayed by the coronavirus pandemic, with private equity billionaire Henry Kravis warning he’s seeing more turmoil in the markets than any time in his half-century career.
The flurry of deals has been across industries. Advanced Micro Devices Inc. announced a $35 billion takeover of Xilinx Inc., helping make this year one of the busiest ever for semiconductor transactions. Then Inspire Brands Inc., the owner of Arby’s and Buffalo Wild Wings, sealed an $11.3 billion purchase of Dunkin’ Brands Group Inc. that will turn it into a fast-food giant.
“We have seen the whole M&A ecosystem going into a bit of an overdrive since Labor Day,” said Neil Dhar, vice chairman and chief clients officer at PricewaterhouseCoopers. “We had deals go into lockdown for several months because of Covid and folks came back post Labor Day with far more optimism and focus on the future.”
Some deals were accelerated in recent days. Stonepeak Infrastructure Partners agreed to buy Astound, the sixth-largest U.S. cable and broadband provider, from private equity firm TPG for $8.1 billion including debt. It preempted a competitive auction that was supposed to conclude later this month, according to people with knowledge of the matter.
Nielsen Holdings Plc also surprised the market by selling its unit measuring consumer insights to private equity firm Advent International for $2.7 billion. Nielsen said it opted to sell the business, instead of an earlier plan to spin it off into a separate listed company in early 2021, as the deal with Advent offered greater certainty for shareholders.
Dealmaking volumes have also been buoyed by liquidity injections from the U.S. and European central banks that have helped boost stock valuations and kept interest rates low, according to Citigroup Inc.’s Luigi de Vecchi.
“This is the perfect combination to do a transaction,” said de Vecchi, the chairman of Citigroup’s banking, capital markets and advisory business for Europe, the Middle East and Africa. “We will continue to see a very sizeable amount of transactions, very high volumes across all sectors.”
A Joe Biden victory on Nov. 3 could have a sweeping impact on mergers and acquisitions. The Democratic politician has set his sights on a higher corporate tax rate, new regulation and increased antitrust scrutiny.
The biggest loser might be private equity. If firms don’t sell portfolio companies before the end of the year, they could have to pay almost double the current rate of capital gains tax on any profits. Some buyout funds have been rushing to offload certain assets before then to avoid the higher levy, dealmakers say.
Large-cap technology and health-care companies will face heightened scrutiny whoever ends up in the White House in January. Democrats have been considering several new laws that would increase the number of deals facing regulatory challenges and would also lower the bar for complaints against monopolies.
For now, the recent run of acquisitions is helping extend a nascent recovery in global dealmaking, with activity starting to pick up after volumes plunged the second quarter. The year-to-date tally is now down just 16% to $2.6 trillion, Bloomberg data show.