NEW YORK-The communications industry took the lead in the domestic mergers and acquisitions market during the first quarter, with $26.1 billion in transactions announced, a huge leap from the $1.5 billion announced during the first three months of 1997.
Communications companies posted 56 mergers and acquisitions during the latest quarter, up from 29 during the same period a year earlier, according to Mergerstat, a research service of Houlihan Lokey Howard & Zukin, a Los Angeles investment bank.
“The (communications) industry continues to consolidate, with companies buying access to customer bases to provide faster, cheaper, higher quality, one-stop-shop communications services,” said Sunjay Jindal, a communications industry specialist for Houlihan Lokey.
Acquisition activity in the communications industry last quarter was led by AT&T Corp.’s $11.6 billion bid for Teleport Communications Group. During the first quarter, this was one of 31 deals in all industry sectors that were valued at $1 billion or more.
These giant size deals accounted for $116.5 billion, or 64 percent, of the total value of all mergers and acquisitions announced during the latest complete quarter. They were part of trend of escalation in the dollar value of announced mergers. The average size of all M&A transactions announced during the first quarter rose significantly, to $285 million from $198 million a year earlier.
This was so, even though the average price-to-earnings ratio of these transactions decreased to 25.9 times from 27 times during the same quarter a year ago, and their average premium decreased to 30.2 percent from 32.2 percent.
Overall, 1,884 mergers and acquisitions valued at a total of $180.9 billion were announced during the latest complete quarter, up from 1,852 valued at $144.3 billion during the first quarter of 1997. If the current pace continues, domestic M&A activity in 1998 will break the all-time record set last year of 7,800 deals valued at $657.1 billion.
Houlihan Lokey’s Mergerstat tracks publicly announced mergers and acquisitions involving U.S. business entities. Its data doesn’t include exchanges of business assets, private placements, spin-offs and open-market transactions.
