Merger and acquisition set record pace in first half of 2007

25 Jun, 2007

Merger and acquisition (M&A) activity in the first six months of 2007 hit a record, boosted by the battle for Dutch group ABN Amro and rapid growth of the private equity sector, a study showed on June 22.
The list - including completed and ongoing take-overs - shows that M&A deals totalled 2.510 trillion dollars (1.87 trillion euros) in the first half, according to Canadian financial data provider Thomson Financial.
That was a massive 53-percent increase compared with the same period of 2006.
The frenetic pace of take-overs in Europe, meanwhile, outpaced the United States for the first time in four years.
"This is the fifth successive year of growth and sets an all time record for first-half activity," Thomson Financial added in the report.
However, the study was somewhat distorted by the presence of two competing bids in the biggest-ever banking sector take-over battle for control of ABN Amro.
In April, ABN Amro agreed to a take-over from British bank Barclays, whose bid was levelled at 90.8 billion dollars, according to Thomson Financial data.
A European banking consortium - comprising Britain's Royal Bank of Scotland, Belgian-Dutch group Fortis and Spain's Santander Central Hispano - topped the Barclays bid with an offer of 97 billion dollars.
"M&A activity in Europe during H1 exceeds the United States for the first time since 2003 with 983 billion worth of deals, up 67 percent from H1 2006," the study found.
"However, the trend could reverse at anytime if one of the competing bids for ABN Amro lapses." The two blockbuster ABN bids headed Thomson Financial's top ten M&A deals so far this year.
Aside from ABN, the private equity sector also loomed large over the wallet-busting chart. US private equity group Kohlberg Kravis Roberts (KKR) won two places in the top ten, following its purchase of US credit card transaction processor First Data for 27 billion dollars in April.
KKR also offered 44.4 billion dollars for Texas energy group TXU in February, alongside peer Texas Pacific Group, and US investment banks Goldman Sachs, Morgan Stanley, Citigroup and Lehman Brothers.
The TXU take-over - which remains the largest-ever-private equity-backed deal in the world - won the coveted fifth-biggest M&A deal, according to Thomson Financial.
Europe's biggest-ever-private equity deal was last April's purchase of British pharmacy giant Alliance Boots for 22 billion dollars.
The buyer - which was none other than KKR - saw the transaction waved through by the European Union's top antitrust regulator recently.
Thomson Financial said on June 22 that private equity accounted for 21 percent, or 527 billion dollars, of the total M&A activity in the first half of 2007.
The private equity sector has grown into a formidable power in international financial markets in recent years.
With their seemingly unstoppable success has come some controversy, however, and they often stand accused by trade unions of cutting jobs and being endangering the stability of the financial world.
Private equity groups raise cash from private investors and then invest the money either in underperforming publicly listed companies, which they take private, restructure and then re-sell, or invest in promising new businesses.
However, some experts argue that private equity-backed deals are often highly leveraged and involve large amounts of debt.
"Private equity firms are churning out their companies at ever-greater speeds; buying private entities, or taking private public entities; adding shareholder value, then putting them back into the public markets," said US accounting firm Ernst & Young in a report earlier this week.

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