Daily Management Review

Mega US Health Care Mergers Drives Global M&A To Record High In Q1, 2018


04/04/2018




Mega US Health Care Mergers Drives Global M&A To Record High In Q1, 2018
A seventeen year high has been reached for the first quarter of the current year by the merger and acquisition (M&A) activity throughout the world. This was disclosed by an analysis conducted by the research firm Mergermarket which published the findings in a report recently.
 
The firm said on Wednesday that deals worth $890.7 billion were struck through M&A globally in the first quarter of 12018 through a total of 3,774 deals to this effect. According to Megermarket, which had started collected merger and acquisition data and publishing them in 2001, the first quarter was the strongest that it had recorded for nay first quarter. The total value of the mergers and acquisitions struck in this quarter in 2018 was 18 per cent greater than the figure last year for the same period.
 
"The extraordinary surge in dealmaking seen at the end of 2017 has carried through into 2018," Jonathan Klonowski, research editor at Mergermarket said in the quarterly report. The pressure on companies exerted by their shareholders was one of the drivers of the increase while the pressure leading companies to look for innovation available in other companies was another driver pushing companies towards consolidation.  
 
"Amazon's move into pharmaceuticals appears to have been a catalyst for dealmaking in health care-related areas with the CVS/Aetna deal announced in December and the Cigna/Express Scripts transaction this quarter," he added.
 
With the aim of reducing the health related costs for its employees in the United States, a partnership was announced in January by Amazon with J.P. Morgan and Berkshire Hathaway’s Warren Buffet. Fears and anticipation that the largest e-retailer of the world may shift and diversify into the health segment and give competition to conventional firms in the health care industry. This pressure has forced many firms in the industry to look for consolidation and to gain strength through mergers and acquisitions to get ready to counter the possible threat from Amazon.
 
In early March, Express Scripts was bought over for $54 billion in a cash and stock deal by Cigna.  In another cash an stock deal last month, approval of acquiring Aetna for $69 billion was given by shareholders of CVS
 
The United States alone accounted for 44,.2 per cent of the total merger and acquisition deals globally and the deals mentioned above drove the M&A market in the U.S. in the first quarter. The deals were particularly relevant for the business environment in the U.S.
 
The report states that $393.9 billion have been invested in U.S. companies so far this year. compared to the invetsments that had been made in the same period last year, this was an increase of 26.1 per cent.
 
"Domestic dealmaking has been a key factor registering 952 deals worth $330.8 billion," the report said.
 
But consolidation has not bene limited to the U.S. companies and the U.S. market alone. China has also witnessed a string of consolidation deals domestically where $68.7 billion was spent in M&A which is an all-time record for the first quarter for the China market.
 
"Domestic M&A accounts for 85.2 percent of Chinese acquisitions in Q1 (first quarter) 2018, a significant increase from the 61.6 percent and 71.3 percent seen during 2016 and 2017," Mergermarket said.
 
(Source:www.cnbc.com)






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