M&A tide swelling fast
Friday’s £307m acquisition by Carillion of energy efficiency company – and MHP client – Eaga was the latest big splash in a wave of M&A activity that the City will hope to keep surfing hard as it gathers pace throughout 2011.
MHP’s Financial & Investor Communications team certainly saw a marked pick-up in activity in the fourth quarter of 2010, with Monday 13 December in particular standing out. On a day widely termed “Merger Monday”, there was a flurry of deals announced with a total value of around £2.5bn – a substantial proportion of which involved MHP clients. And the momentum has continued to build in the early months of 2011, with the Eaga/Carillion tie-up a prime example.
The trend is by no means limited to UK markets either, as reports have indicated global deal volume for January 2011 to be around a third higher than last year, and the best January since 2008. February has continued even more strongly so far, with the Financials, Industrials, Support Services and Power sectors leading the way and wide predictions that there is plenty more to come.
With cost cuts in place, company balance sheets in much better shape, and financing options becoming more easily available, it is only logical that the larger players look to do something with their cash, and many are looking to acquisitions to bolster growth in the absence of any material growth in the overall economy.
Shareholders are proving keen enough to back these deals too, with many instances of share prices rising for the acquirers as well as acquirees once deals are announced. Speciality chemicals company Yule Catto – another MHP client – is a case in point having seen a 12% share price jump on the day it acquired its peer PolymerLatex for £376m, since when its stock has continued to rise.
We are seeing and hearing about plenty more deals in the City pipeline, giving us every confidence that there won’t be an M&A wipeout any time soon.