NEW YORK-Mergers and acquisitions by U.S. companies appeared to be unaffected in the first quarter of this year by recent volatility in the equity markets and concerns about higher interest rates and inflation.
The overall value of proposed transactions announced in the first quarter of 1997 increased by 73 percent to $144.3 billion, up from $83.4 billion during the first quarter 1996, according to Mergerstat, a research service of Houlihan Lokey Howard & Zukin, a Los Angeles investment bank.
The five most active industries, accounting for 51 percent or $73.6 billion of the first quarter total, were: banking and finance; brokerage, investment and management consulting; utilities; instruments and photographic equipment; and miscellaneous services.
Communications companies played a comparatively small role during the first quarter, accounting for 29 transactions. Of these, the largest by far was a $1.28 billion acquisition of Telekom South Africa by SBC Communications Inc. and Telekom Malaysia Berha. The next largest M&A transaction announced in the category was BellSouth Corp.’s $85.6 million acquisition of American Telecasting Inc.
Of the 29 communications deals announced during the first quarter of 1996, information on base equity price offered was available on only 12. Houlihan Lokey researchers interviewed all companies that have announced mergers and acquisitions each quarter. The 17 communications transactions for which no dollar price was declared, “probably [involve] private companies, which are under no legal obligation to provide information,” said Shawn Eubanks, marketing and communications manager for the investment bank.
In all industry categories, the number of announced deals increased by 45 percent to 1,825 during the latest first quarter, from 1,255 during the same quarter a year earlier. If the current pace continues throughout 1997, U.S. merger and acquisition activity would break the all-time record, set last year, of 5,848 deals valued at $495 billion.
“While rising interest rates and a bearish equity market will quantitatively affect the M&A market, we continue to see strong deal activity ahead,” said Scott Adelson, managing director of Houlihan Lokey. “The fundamental objectives of reducing costs, increasing revenues and accessing new markets will continue to drive the M&A market.”
The average size of all transactions announced during the first quarter of this year was up significantly, to $216 million, compared with $131 million during the first quarter 1996. In fact, 27 mega-deals valued at $1 billion or more accounted for $86.7 billion in value and 60 percent of the total U.S. merger and acquisition market in the last completed quarter.
Houlihan Lokey’s Mergerstat tracks publicly announced mergers and acquisitions involving United States business entities. Not included in its research are deals involving the exchange of business assets, private placements, spinoffs and open-market transactions. For further information, contact Mergerstat at (800) 455-8871.
