Big deals are back. M&A is not.
Bloomberg reports that large acquisitions, led by Verizon Communication's $130bn purchase of its wireless business from Vodafone, pushed mergers up 42% in the third quarter to $671bn, data compiled by Bloomberg show.
That belies stagnation in takeovers below $5bn - the heart of dealmaking - where volumes fell about 2%. Those smaller deals matter to bankers who count on them for close to 90% of advisory fees, according to Freeman & Co.
The big deals, fueled by cheap debt, are concentrated in industries including telecommunications and technology, where companies grappling with disruptive innovations or saturated markets are prepared to pay high prices to secure growth. Smaller companies, meanwhile, are holding off on deals because of lingering concerns about the economic recovery as a surge in stock prices makes targets expensive.
'The softness in M&A is evident in the $1bn to $5bn range', said Cary Kochman, head of North American M&A for Citigroup, 'A number of large deals in 2013 could have been done five years ago or five years from now'.
While the large deals grabbed headlines, there were only 15 of of them in the quarter, compared with about 6,500 valued at less than $5bn. The bigger acquisitions account for just 14% of the $7bn in fees that will be paid to investment banks for deals announced during the quarter, according to estimates by Freeman, a New York-based researcher.
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image: © Theodore Scott