Blockbuster transactions double in 1Q as M&As rebound

The number of mega-acquisitions valued at USD 10 bn or above more than doubled worldwide in the 1Q 2024, with 11 transactions totaling USD 215 bn taking place over the first three months of 2024, compared to five transactions worth a total of some USD 100 bn during the same period last year, the Financial Times reports, citing data from the London Stock Exchange Group.

The growth was driven by large-scale transactions in the US in the energy, tech and financial sectors, reflecting companies’ appetite for “capitalizing on the market conditions to accelerate growth,” Citi’s head of investment banking Tyler Dickson told FT.

This growth indicates that the market is on course to recover from its “lengthy drought”, following a period of stagnancy in M&A activity on the back of the Covid-19 pandemic and the ensuing market volatility, which led to the market shrinking to a decade-low.

While large-scale transactions are seeing an uptick, the total number of transactions globally fell 31% over the first three months of 2024. However, the overall value grew to USD 690 bn, marking a 30% y-o-y increase.

What spurred the rebound? M&A activity surged as investors anticipate rate cuts from central banks, expected to come in June. The expected rate cuts have reduced financing costs, facilitating takeovers, in tandem with a resurgence in IPO activity.

By region: The US made up the lion’s share of takeover activity, growing 59% y-o-y to USD 431.8 bn. The European market also jumped more than 60% y-o-y to USD 127 bn. Meanwhile, transactions in the Asia-Pacific region fell 28% y-o-y, amounting to USD 90 bn.

The market is expected to expand further: Bankers and M&A firms foresee that the M&A momentum will continue to grow throughout the year as companies pursue more takeovers, as fears of recession diminish and economic indicators suggest that the global economy is headed to a “soft landing” and that inflation is under control. “Boards and management teams feel more comfortable about the future,” Reuters quotes co-head of global M&A at Bank of America Ivan Farman as saying.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.3% last Thursday on turnover of SAR 10.5 bn. The index is up 5% YTD.

In the green: Modern Mills (+9.5%), Med Gulf (+6.5%) and AlYamamah Steel (+5.3%).

In the red: Saudi Research and Media Group (-10%), Al Mawarid (-9%) and Saudi Cable (-7.8%).

THE CLOSING BELL: NOMU-

The NomuC fell 1.4% last Thursday on turnover of SAR 141.5 mn. The index is up 8.5% YTD.

In the green: Riyadh Steel (+4.5%), AlMohafaza (+3.7%) and AlDawliah (+3.4%).

In the red: AlMuneef (-8.8%), Gas Arabian Services (-7.1%) and AlBabtain Food (-6.2%)

CORPORATE ACTIONS-

#1- Amlak International Finance has obtained the Capital Market Authority (CMA)’s approval to hike its capital to SAR 1 bn through a bonus shares issuance, according to a statement by the CMA last week.

#2- Saudi Automotive Services (SASCO)’s BoD has recommended increasing its capital to SAR 100 mn from retained earnings through a grant of new shares, according to a disclosure to Tadawul last week. If approved by shareholders, the company’s capital will increase to SAR 700 mn from a current SAR 600 mn.

ALSO- SASCOhas recommended an additional dividend distribution of SAR 45 mn at SAR 0.75 apiece for FY 2023, it said in a disclosure to Tadawul last week. The move comes after SASCO distributed interim dividends of SAR 0.5 apiece to eligible shareholders for the first half of the year, bringing total dividends for the year to SAR 1.25 per share.