Companies unleashed a wave of global takeovers on Monday, agreeing more than $70bn in deals as multinationals targeted the booming US market to squeeze out competitors and find new sources of growth.
Industry leaders such as US discount brokerage Charles Schwab, French luxury powerhouse LVMH, Swiss drugs company Novartis and Japanese conglomerate Mitsubishi all snapped up rivals to extend dominance over their sectors.
The shopping spree suggests that a dealmaking boom across the corporate world remains intact, after a pause attributed to shrinking confidence among executives and fears of a slowdown in global growth.
Instead, decisions by US and European central banks to cut interest rates even further in recent months have propped up stock markets and extended the availability of historically cheap borrowing.
Recessionary fears have also faded: the yield curve in the US, which was inverted for the first time since the financial crisis this year, is no longer flashing the alarm and S&P Global, the rating agency, said on Monday the probability of a US recession had started to subside.
The deals clinched on Monday will reshape New York’s Fifth Avenue as well as how millions of Americans trade stocks and invest. Famed jeweller Tiffany & Co agreed to be bought for $16.6bn by LVMH while Charles Schwab acquired rival discount brokerage TD Ameritrade for $26bn.
“Companies need growth and that is a big driver for M&A,” said Anu Aiyengar, who runs JPMorgan Chase’s M&A business in North America. “Regulatory uncertainty, equity market volatility, elections and recession are all looming out there and could have a detrimental impact.”
Luigi De Vecchi, who chairs investment banking in Europe at Citigroup, said: “Cash rich companies are once again targeting the US market as many emerging markets represent a more dangerous risk-reward equation due to increased geopolitical risk.”
A string of smaller deals were also notched up, including Swiss drugmaker Novartis’s $9.7bn purchase of biotech The Medicines Company; a Mitsubishi Group-led consortium agreed a €4.1bn takeover of Dutch utility Eneco; and eBay sold its online ticketing business StubHub for $4.1bn to Viagogo.
The threat of future stock market volatility may also be prompting boards into action, as the US moves closer to its next election. The prospect of a Democrat winning the presidency may impact regulatory scrutiny, compared with the administration of Donald Trump, which has been seen as far easier on deals. On Monday, analysts raised that question with Charles Schwab’s chief executive, who played down the risk of antitrust authorities thwarting the TD Ameritrade takeover.
“While recent regulatory processes have been challenging in some situations, the possibility for more restrictive policies under future administrations may be convincing some to accelerate their acquisition plans,” said Frank Aquila, a partner at law firm Sullivan & Cromwell.