US M&As reach a seven-year peak

Riding a wave of optimism in the tech markets, investors and acquirers are driving one of the most successful M&A periods in the USA in recent years. With a greater number of well-qualified sell businesses and a better understanding of the corporate financing sphere, major firms as well as smaller players have felt confident to do big businesses this year. Silicon Valley especially has seen a surge of tech acquisitions, the latest announced this week as real estate website operator Zillow is buying San Francisco-based Truila for $3.5 billion.

According to trade sources, in the first half of 2014 companies in the USA paid out some $982 billion in M&As, the largest sum since the first half of 2007 and up from up from a strong $570 billion for the same period in 2013.

Interestingly, the number of deals has remained the same between the first half of 2013 and 2014, suggesting that activity has not changed as much as valuations, market competition and demand to expand portfolios, even at greater cost. Indeed, a number of deals that many considered overpriced have gone through this year (WhatsApp, Beats and Oculus purchases, for example). Some deals were more than $50 billion, including the Time Warner Cable/Comcast and DirecTV/AT&T mergers.

Many of the big deals have been done by the majors as Facebook, Yahoo and Google continue to acquire smaller firms to get new talent and take on start-ups whose new technology may pose a competitive threat eventually. While Facebook seems to have done its businesses for the year, Apple continues to search out viable acquisitions, most recently concluding the purchase of reading recommendation app BookLamp.

This optimistic attitude is also transferring to Europe, with digital majors increasingly looking to set up shop on the continent to find new talent, as Google did in London recently. As we have reported, the USA is already seeing one of its most fertile venture capital years, and the good fortunes in M&A will only strive to provider greater liquidity in the markets.

This optimism is backed up by the figures. Far more deals are being done with foreign companies, as US firms spent $308 billion in M&As overseas, more than triple the amount in 2013. This is down to several factors. Firstly, more countries around the world are able to produce tech firms due to improving local incubators, government support and better digital economies. Secondly, high competition domestically is forcing US firms to look elsewhere, with potential value-for-money enterprises appearing more frequently out of emerging markets. Thirdly, there is greater interconnectivity between global finance markets and tech players, allowing for more reliable and trusted acquisitions internationally.

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