Blockbuster transactions double in 1Q as M&As rebound

The number of mega-acquisitions valued at USD 10 bn or above more than doubled worldwide in the 1Q 2024, with 11 transactions totaling USD 215 bn taking place over the first three months of 2024, compared to five transactions worth a total of some USD 100 bn during the same period last year, the Financial Times reports, citing data from the London Stock Exchange Group.

The growth was driven by large-scale transactions in the US in the energy, tech and financial sectors, reflecting companies’ appetite for “capitalizing on the market conditions to accelerate growth,” Citi’s head of investment banking Tyler Dickson told FT.

This growth indicates that the market is on course to recover from its “lengthy drought”, following a period of stagnancy in M&A activity on the back of the Covid-19 pandemic and the ensuing market volatility, which led to the market shrinking to a decade-low decline.

While large-scale transactions are seeing an uptick, the total number of transactions globally fell 31% over the first three months of 2024. However, the overall value grew to USD 690 bn, marking a 30% y-o-y increase.

What spurred the rebound? M&A activity surged as investors anticipate rate cuts from central banks, expected to come in June. The expected rate cuts have reduced financing costs, facilitating takeovers, in tandem with a resurgence in IPO activity.

By region: The US made up the lion’s share of takeover activity, growing 59% y-o-y to USD 431.8 bn, Reuters reports. The European market also jumped more than 60% y-o-y to USD 127 bn. Meanwhile, transactions in the Asia-Pacific region fell 28% y-o-y, amounting to USD 90 bn.

The market is expected to expand further: Bankers and M&A firms foresee that the M&A momentum will continue to grow throughout the year as companies pursue more takeovers, as fears of recession diminish and economic indicators suggest that the global economy is headed to a “soft landing” and that inflation is under control. “Boards and management teams feel more comfortable about the future,” Reuters quotes co-head of global M&A at Bank of America Ivan Farman as saying.

ALSO WORTH NOTING- Amazon ramps up AI investments with USD 2.75 bn for AI startup: Amazon has pledged a USD 2.75 bn investment in US-based AI firm Anthropic, marking the e-commerce giant’s largest venture investment to date and bringing the total value of its investments to Anthropic to USD 4 bn, the Financial Times reports.

The company is attracting interest from investors, with Anthropic poised to raise at least USD 750 mn from VCs in a funding round expected to close next month, people familiar with the matter told FT. Google has reportedly also agreed to pour USD 2 bn into the startup, according to a person in the know.

ICYMI- Abu Dhabi sovereign wealth fund Mubadala agreed to purchase a USD 500 mn stake in Anthropic from Sam Bankman-Fried’s bankrupt crypto exchange FTX earlier this week. Mubadala is the biggest buyer in a consortium of buyers snapping up two-thirds of FTX’s 8% stake in the company.

THE MARKETS THIS MORNING-

It feels kind of lonely here in Dubai as we look ahead to the trading day: The Kospi, Hang Seng, and Shanghai Composite are all in the green, but markets from London and Paris to New York and Toronto are closed today and Monday for the Easter long weekend.

YESTERDAY- The S&P 500 rose on Thursday, posting its best Q1 performance in five years, CNBC writes. At the end of the first quarter:

• The Nasdaq is now up 9.1% year-to-date;
• The S&P climbed 10.2%;
• The Dow is up 5.6%.

THE CLOSING BELL-

The DFM stayed flat yesterday, on turnover of AED 407.1 mn. The index is up 4.3% YTD.

In the green: Depa Limited (+15.0%), Al Firdous Holdings (+5.0%) and Parkin Company (+4.7%).

In the red: Shuaa Capital (-8.1%), Al Salam Sudan (-5.8%) and National Central Cooling Co. (Tabreed) (-3.9%).

Over on the ADX, the index is down 0.1%, on turnover of AED 1.2 bn. Meanwhile the Nasdaq Dubai fell 0.2%.

CORPORATE ACTIONS-

The Bank of Sharjah inked a sale and leaseback agreement worth AED 85.3 mn with Thumam Investment, according to an ADX disclosure (pdf). The agreement will see Thumam pay an annual rent of AED 8 mn over a ten year tenor.

Adnoc Distribution approved a dividend payout of some AED 1.3 bn for 2H 2023,equivalent to 10.9 fils per share, bringing the total dividend payout for 2023 to AED 2.57 bn, according to an ADX disclosure (pdf). The company also approved a new five-year dividend policy which will see it pay out some USD 700 mn — or 75% of net income, whichever is higher — every year until 2028.

DEWA approved a dividend payout of AED 3.1 bn to its shareholders for 2H 2023, bringing total dividends for the year to AED 6.2 bn, according to a DFM disclosure (pdf).