Corporate M&A Breaks New Record

Corporate mergers and acquisitions (M&A) activity has broken a new record this year, according to the latest data from Jeff Golman, vice chairman of Mesirow Financial.

In a news report for Forbes on Thursday (Sept. 21), Golman noted that not only is corporate M&A at its highest level ever, it also accounts for the largest-ever portion of total M&A activity. Seventy percent of the M&A market in the first half of the year was due to corporate M&A activity.

According to Golman, one factor behind this surge is that corporate cash reserves are the highest they have been in a decade, with the top 25 non-financial corporate borrowers holding more than half of the $1.9 trillion in cash and liquidity investments, according to S&P Global Ratings data. That means companies have nearly $1 trillion in liquid capital ready for investing, and businesses are turning to M&A with the cash.

“Corporations also have the capital space, credit lines and shareholder support to make accretive acquisitions and roll them into existing operations,” he wrote, adding that corporate buyers are also using mergers and acquisitions to bolster their ability to meet fluctuating market demands.

Golman pointed to Amazon’s $13.7 billion takeover of Whole Foods Market as one example of this strategy, which aims to help Amazon remain competitive against Google Express and broaden its market reach outside its traditional eCommerce model.

More than 54 percent of total M&A value in 2015 came from deals worth at least $5 billion, according to analysts, compared to 45 percent of 2015 deals that were worth $5 billion or more, and 33 percent in 2010.

“As corporate shareholders and boardrooms explore various M&A routes to find accretive growth in their underlying operations, financial buyers continue to garner new interest, bolstering their deployable capital going forward,” said Golman, adding that, as of July of this year, financial buyers held a collective $9.63 billion to fuel M&A deals.