The Definition of M&A
The words “merger” and “acquisition” are often used interchangeably, they actually mean different things. A merger is when two existing companies seize to exist and merge into a united enterprise. An example of a merger would be Exxon and Mobil Corp’s $81 million merger in 1999. When a firm wants to take ownership of another company instead of merging, it is called an acquisition. An M&A that takes on a hostile attitude is usually labeled as an acquisition. An example of an acquisition is Manulife Financial Corporation’s acquisition of John Hancock Financial Services in 2004. The types of approach that companies take when consolidating directly impact which sides of M&A they will classify it as. The biggest M&A deals tend to be facilitated by bulge bracket banks and become headlines on Wall Street Journal. This is because they are extremely lucrative. This graph shows the number of M&A that has occurred in North America since 1985 and their values in billions of USD.
M&A In 2020
Since the virus posts some serious danger to the financial industry, which can obviously be seen in the volatility of the market right now, industry leaders are post with a question of where they see M&A going during this eventful time. A Deloitte survey reveals that most are optimistic about the future direction of M&A transaction occurring this year. In the survey they ask one thousand executives from corporations and private equity firms what their opinion is on deals right now and what the expectations are for the year. Surprisingly, most said that, despite the virus, deals are still coming in strong and progressing. Only around 4% of the executives believe otherwise. The graph below shows Deloitte’s projection on the growth in number of deals for private equity investors and corporations during this year.
Despite COVID-19 impacting many aspects of the broad financial field, M&A seems to be safe from it. If anything, there seems to be an expectation of growth in deal numbers. Companies who are looking to grow amidst this economic uncertainty are expected to take a more aggressive approach to M&A.
“2020 Global M&A Outlook.” 2020 Global M&A Outlook | J.P. Morgan, www.jpmorgan.com/global/investment-banking/2020-Global-MA-Outlook.
Hayes, Adam. “How Mergers and Acquisitions – M&A Work.” Investopedia, Investopedia, 1 July 2020, www.investopedia.com/terms/m/mergersandacquisitions.asp.
Meet the authors Russell Thomson National Managing Partner | M&A Services [email protected] . “2020 M&A Trends Report.” Deloitte United States, 28 Apr. 2020, www2.deloitte.com/us/en/pages/mergers-and-acquisitions/articles/m-a-trends-report.html.