More than $50 billion worth of takeovers were being lined up on Wednesday, in a final flurry of dealmaking that saw global volumes exceed $1.2 trillion in a record-breaking quarter.
In the latest sign of how eager boardrooms are sparking a record number of "megadeals", Japan's top drugmaker Takeda revealed it was weighing a $40 billion takeover of Irish rival Shire.
Concho Resources, a US oil and gas producer, agreed to buy rival RSP Permian for $9.5 billion including debt and CME Group, the Chicago exchange, agreed to buy Nex Group, in a deal that valued the UK group at nearly £3.9 billion.
Despite a heightened level of political uncertainty, a potential US-led trade war against China and fraught Brexit negotiations, companies have embarked on an unprecedented number of big acquisitions this year. The value of $5 billion-plus deals is more than triple year-ago levels, according to data provider Thomson Reuters.
More than half of the $1.2 trillion worth of acquisitions in the first quarter — the fastest start to a year ever — have been worth in excess of $5 billion.
The overall level of activity is up more than 67 percent from a year earlier and about a third ahead of 2007, the previous high-water mark for takeovers.
The surge of big transactions — with more than 20 deals worth at least $10 billion — has been bolstered by a desire by boards to head off disruptive technological threats and accelerate growth, according to bankers and lawyers who spoke to the Financial Times.
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The deals have been spurred by quickening global growth and robust business confidence, as well as tax cuts passed in the US last year that have added to the firepower for marquee acquisitions."
In an environment where growth is back, companies feel the pressure to justify the multiples they are trading on," said Alison Harding-Jones, Citigroup's Europe, Middle East and Africa M&A head.
Dealmaking in Europe has more than doubled from year-ago levels, led by accelerating activity in the UK, Germany, Spain and the Netherlands. Some bankers and lawyers expect the pace of divestitures to accelerate, opening the door for private equity groups.
That was apparent in a 10.1 billion euro deal, including debt, clinched this week between Carlyle and Dutch paint maker Akzo Nobel for the latter's speciality chemicals business. The acquisition is one of the largest European private equity deals agreed in recent years.
Stephen Arcano, head of M&A at Skadden, said companies were being vigilant about potential political risks but for the time being there was no evidence that the pace of deal talks would slow down later in the year.
First-quarter dealmaking
Here are some of the significant themes that have emerged in the first quarter of dealmaking in 2018.
Morgan Stanley unseats Goldman Sachs
Morgan Stanley dethroned its rival Goldman Sachs from the top of the world's M&A rankings in the first quarter of 2018, due to a consistent pipeline of megadeals in the first three months of the year, writes James Fontanella-Khan.
Morgan Stanley advised buyers and sellers around the globe for a total of $385 billion worth of deals, about a third more than the $264 billion worth of transactions Goldman advised on during the first quarter, according to Thomson Reuters.
The advisory division led by Robert Kindler, Morgan Stanley's vice-chairman and global head of M&A, worked on fewer deals than Goldman during the same period — 65 compared with 85 — but on significantly more big-ticket transactions.
Morgan Stanley advised on six out of the 10 largest deals, including US health insurer Cigna's $68.5 billion acquisition of pharmacy benefits manager Express Scripts and European media group Sky, which was approached by US cable company Comcast in a deal worth $39.8 billion.
Although the data for Morgan Stanley were slightly skewed by the inclusion of Unilever choosing Rotterdam over London for its single legal base — which Thomson Reuters valued as a $90.5 billion transaction — the New York investment bank would have still ended the quarter at the top.
JPMorgan Chase and Citibank followed the two investment banks in third and fourth position in the rankings, respectively.
Centerview Partners, which jumped from 21st to fifth in the ranking, was the only boutique investment bank to make it into the top 10.
The firm co-founded by Blair Effron and Robert Pruzan advised Express Scripts in its sale to Cigna and Thomson Reuters in the $17 billion sale of the majority of its financial and risk assets to Blackstone.
Chinese regulatory uncertainty subdues appetite
Bankers and lawyers are blaming regulatory uncertainty and jittery relations between the US and China for a 15 percent decline in Chinese cross-border dealmaking so far this year, writes Don Weinland.
Chinese companies spent just $25.2 billion on overseas assets in the first quarter, while the number of deals fell to the lowest mark since 2005, according to data from Thomson Reuters.
The only sizeable negotiation so far in 2018 was Geely's unsolicited $9 billion investment in Germany's Daimler, the owner of Mercedes-Benz.
Behind the low deal count is a deterioration of relations between China and the US and more resistance against China's acquisitions of US technology.
"For me the biggest challenge is the regulatory uncertainty in the US and the future of US-China relations," said Miranda So, a Hong Kong-based partner at law firm Davis Polk. "It's this risk that has subdued some of the appetite for overseas deals."
In a report for new tariffs on Chinese exports last week, the US named several companies that have repeatedly bought US businesses and technologies. The accusation from the US administration is that Chinese policy and cheap loans from state banks were behind the flurry of deals over the past three years.
But M&A activity is expected to pick up in coming months as China's political situation firms up, although the focus could fall outside of the US.
"The government's new economic team is in place in Beijing and everything has settled down," said Tang Zhenyi, chairman of Hong Kong-based investment bank CLSA. "Now the corporations can focus on going out, on going global. I think that means it will be a big year for Chinese companies doing overseas deals."
A series of sensitive political meetings kicking off in October of last year had disrupted deal flows in 2017, with companies such as HNA Group waiting for clarity on what types of outbound investment would be allowed.
U.S. crackdown threatens bullish mood
The crackdown was swift, just as much as it was unexpected. In short order earlier this month, the US government acted to, in effect, block the prospects of the largest technology acquisition of all time: the $142 billion takeover of chipmaker Qualcomm by Singapore-based Broadcom, writes Arash Massoudi.
The use of national security concerns by President Donald Trump to block a takeover that had yet to be agreed was unprecedented and spooked dealmakers around the world at a time when the US government is pursuing more protectionist policies.
It is uncertain whether a further freeze in global dealmaking will take a hold, but for now cross-border mergers and acquisitions account for more than $511.7 billion in overall activity in the first quarter of this year. That is up 76 percent from the same period a year ago and advisers see no sign that a slowdown is coming.
"M&A dialogue remains robust despite concerns about the potential impact of changes in America's trade and national security policies on deal activity," said Stephen Arcano, head of M&A at Skadden.
One area where the US actions did have an effect however was in deals from China, with companies from the country registering just 4 percent of the activity so far in 2018.
US companies launched more than $101 billion worth of overseas deals, with the largest move coming from cable group Comcast as it tries to break up a takeover of UK pay-TV broadcaster Sky.
Other significant cross-border transactions in the period include Italy's Atlantia and Spain's ACS teaming up to jointly take over Abertis, the Spanish highway concessions group.
The largest European deal into the US came in January when privately held consumer group JAB Holding agreed to pay $18.7 billion in cash to acquire soft-drink maker Dr Pepper Snapple and combine it with its Keurig Green Mountain coffee business.
Strong demand powers buyout funds
Global private equity deals have enjoyed their strongest start in five years, buoyed by the record amounts of cash flowing into the sector as institutional investors look for ways to boost their returns, writes Javier Espinoza.
Buyout-backed transactions totaled $79.7 billion in the first quarter, a 30 percent rise from a year earlier. The figure represents 7 percent of overall global dealmaking activity, according to Thomson Reuters data.
The US saw the biggest increase in private equity transactions with a 52 percent rise in deals led by buyout funds, accounting for a total of $46.4 billion so far this year. In Europe dealmaking jumped 27 percent, totaling $19 billion and the most active year since 2007. Asian deal flow shrank slightly.
The two largest transactions for the first quarter were Blackstone's $17 billion acquisition of the financial terminals and data unit of Thomson Reuters and Carlyle's 10.1 billion euro acquisition of Akzo Nobel's speciality chemicals unit.
Rob Pulford, head of financial sponsors for Europe, the Middle East and Africa at Goldman Sachs, said he expects activity levels to surpass those of 2017. He said: "This year is as good as last year and I think 2018 will be even more active. We are seeing the biggest deals in a long time."
Pulford expects a bulk of the deals to come from private equity groups acquiring listed companies following a doubling in the value of such deals last year. "The level of dialogue and conversation around public to private transactions has accelerated from last year. Boards of companies have decided that what's on offer is compelling," he said.
But as the pace of dealmaking speeds up, advisers to buyout funds have warned that there is a risk of overpaying for assets as multiples have already surpassed the record highs of before the financial crisis.
--Additional reporting by FT's Arash Massoudi and James Fontanella-Khan