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Despite Wall St. Wavering, Merger Market Is Largely Intact


By many measures, the markets should have made for a fairly weak quarter in deal making.

Stocks wavered, making it difficult for buyers and sellers in the merger market to agree on a price. Declines in oil and natural gas left energy acquisitions relatively dormant. Financing, especially for more-troubled companies, was virtually shut down.

And yet, somehow the numbers came out all right.

Globally, companies conducted $682.3 billion worth of transactions during the three months through March, according to data compiled as of Wednesday by Thomson Reuters. While that figure is below last year’s comparable period, it is about 14 percent above the average volume during each of the first quarters over the last two decades, the data showed. The number of deals — 8,491 during the first quarter — was about 1.6 percent less than the mean, according to the data.

“I think this market is relatively healthy, not withstanding the fact that we had some pretty significant market turbulence,” said Mark G. Shafir, the global co-head of mergers and acquisitions at Citigroup. “The market held up pretty well and confidence held up pretty well.”

Instead of succumbing to the turbulence, companies sought targets outside their homelands. Cross-border mergers and acquisitions represented almost half of the deals, a record for any first quarter, Thomson Reuters data showed.

Six of the top 10 deals during the quarter involved buyers and sellers from different countries.

Some of these were Chinese companies looking to invest internationally as their domestic economy struggled. They included China National Chemical Corporation’s $43 billion agreement to acquire Syngenta, a Swiss-based manufacturer of agricultural chemicals and seeds.

Others were drawn by the ability to pay a lower tax bill, such as Johnson Controls, which decided to move from Milwaukee to Cork, Ireland, by combining with Tyco International.

And some buyers capitalized on the volatility by buying their prized targets at depressed prices, such as TransCanada’s decision to buy Columbia Pipeline Group for $10.2 billion. Columbia’s stock declined more than 35 percent over the year until March 9, the day before reports surfaced of a takeover.

“Given the decline in the U.S. stock market, it certainly created opportunities to buy companies at values that may not have existed in recent years,” said Larry Hamdan, the head of Americas mergers and acquisitions at Barclays.

For many deal advisers the quarter felt a bit quieter compared with last year — a record in terms of aggregate transaction values. In the first three months of 2016, the figure was more than 57 percent below the fourth quarter of 2015, Thomson Reuters data showed.

“There’s a little more uncertainty in the market than a year ago,” said Kai Haakon Liekefett, a partner in the mergers and acquisitions group at Vinson & Elkins. “Last year was an unbelievable, record year. It was off the charts. It’s hard to repeat that.”

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