The first mega-deal of this year was the £22 billion (Dh115.2bn) takeover of Baxalta by Shire. Shire had been courting Baxalta since July, but possible tax liabilities prevented the deal. Now a way has been found around that, by Shire making an enhanced cash-and-shares offer at a 37 per cent premium to Baxalta’s closing share price the day before the approach was revealed.
Last year, UK companies were involved in 39.4 per cent of all European deals as either buyer or seller, according to Dealogic. That trend looks set to continue this year. Companies have cash to spend and banks are continuing to lend. High board confidence and shareholders pushing for more are likely to make for a strong pipeline of deals. In the energy and mining sectors, the biggest companies with the strongest balance sheets will look to bottom-fish for assets. One deal that began more than a year ago, Royal Dutch Shell’s £40bn takeover of BG Group, will almost certainly be completed this year, even if some shareholders have gone public with their opposition.
Analysts expect to see many distressed companies involved in mergers and acquisitions, and some failing companies trying to prop one another up. Two of the small explorers that operate in the waters around the Falklands have already taken such a step. Rockhopper said it was buying Falkland Oil and Gas in a £57 million deal before Christmas.
In the airline sector, IAG, which is 10 per cent owned by the state of Qatar and which is the parent of British Airways, has made no secret of its desire to add one or two more airlines to its portfolio. Willie Walsh, IAG’s veteran chief executive, is in the lucky position of having airlines coming to him begging to be bought. Having digested Aer Lingus last year, he may be back for more this year with Finnair, which is already a Oneworld partner. A deal in Latin America, where there would be synergies with Iberia, could also be in the making.
In the media world, the British government could finally get around to privatising Channel 4, the state-owned but commercially funded broadcaster. In the hotels sector, IHG – once known as InterContinental – is viewed as a target, with one of the major US groups such as Starwood Hotels & Resorts or Wyndham as possible buyers. IHG is a possible target for American companies seeking to switch their domicile to the UK to pay less corporation tax. This rationale has been behind some of the biggest pharmaceutical sector deals, and is expected to drive more transactions this year.
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