M&A Activity Finally Reaches Escape Velocity in 2014

We’ve been hearing that the economy is “back on track,” whatever that means, for some time now. Unfortunately, available data hasn’t made it easy to determine whether this is actually the case. Every time optimists find something to support the assertion that economic activity is finally picking back up, naysayers quash the sunniness with seemingly contradictory data points.

Until now. Slowly but surely, the optimists are winning out. Though GDP and job-creation figures tend to get more press, one metric has lately taken economic experts by surprise — in a good way. It’s the total value of 2014 M&A activity.

According to a recent article in Fortune (http://fortune.com/2015/01/05/2014-was-a-huge-year-for-ma-and-private-equity/), global M&A activity jumped 47% between 2013 and 2014. That increase is far above the five-year average and owes a great deal to the activities of U.S.-based companies. In particular, hot U.S. industries like healthcare and energy account (http://carykochman.datanetgroup.com/why-2014-mergers-and-acquisitions-deals-have-topped-the-charts/) for some of the highest-profile consolidations over the past 12 months. Energy M&As approached $500 billion this year, and healthcare has seen its strongest period of activity since the Reagan presidency.

Moreover, says Fortune, 10 of the 15 largest 2014 big business deals involved companies based in the United States — an impressive distinction in an increasingly multi-polar world. Total U.S. M&A activity increased by 51% to about $1.5 trillion, outstripping activity in the “sexier” Asia-Pacific region by a factor of two to one.

It’s worth noting that the eye-popping boost in the value of global dealmaking can be traced to the overall value of individual deals. Simply put, 2014 saw more “mega-deals” between immediately recognizable companies than 2013 — or, for that matter, any year since the mid-2000s. The total number of global M&A deals, according to Fortune, only rose 6% between 2013 and 2014.

Public mergers and acquisitions often grab the spotlight, and with good reason. But 2014’s M&A activity was encouraging for another reason: It featured a wealth of private equity deals, suggesting that historical conservative private equity types might finally be acclimating to the new economic reality. According to data collected by Thompson Reuters, private equity activity accounted for nearly 22% of total M&A value in 2014 — roughly $560 billion, or an increase of nearly 45% over 2013. As a proportion of total M&A, that’s an all-time high.

2014 saw too many business deals to name here, of course, but a few were big enough — or just plain noteworthy enough — to make global headlines:

* Actavis’s $66 billion splurge on Allergan * Comcast’s $70.6 billion grab for Time Warner Cable * Novartis’s $20 billion tieup with GlaxoSmithKline * Medtronic’s $43 billion merger with Covidien * Halliburton’s $35 billion marriage with Baker Hughes * Reynolds American’s $27 billion purchase of Lorillard

And remember, these deals are just the tip of the iceberg. If the momentum keeps up, the business world can look forward to a very interesting 2015.