In 2017, mergers and acquisitions reached the third-highest annual level since the 2008 crisis: over 50,000 worldwide. This is due to the buoyant markets and accelerating economic growth worldwide, which have encouraged CEOs to pursue major transformative deals, even if their targets are unwilling. This dealmaking frenzy started before Trump's tax reforms, which further benefit large corporations. Global M&A reached $3.54 trillion in 2017, powered by cheap debt financing and high CEO confidence.
One unsuccessful instance was the chipmaking company Broadcom Ltd.'s (NASDAQ: AVGO) bid to overtake rival chipmaker Qualcomm Inc. (NASDAQ: QCOM) In that case, Qualcomm refused to engage. However, most mergers and acquisitions in the past year have been initiated by buyers, rather than by the smaller companies themselves. Experts believe that the buyers' aggression is fueled by the belief that they have no competition. This enables them to confront their targets first privately, but with the implicit threat of eventually going public with their offers. Even in times of political uncertainty, as is currently the case with Britain, due to Brexit, clear strategies enable companies to pursue major league deals to enhance organic growth.
Some of 2017's biggest acquisitions include CVS's (NYSE: CVS) purchase of Aetna (NYSE: AET), Walt Disney Co's (NYSE: DIS) purchase of businesses from Twenty-First Century Fox, JAB Holdings's purchase of Panera (NASDAQ: PNRA), Tapestry's (NYSE: TPR) purchase of Kate Spade, United Technologies Corp's (NYSE: UTX) purchase of Rockwell Collins Inc. (NYSE: COL), and Amazon's (NASDAQ: AMZN) purchase of Whole Foods. For many of these deals, stocks of the acquiring company served as part of the purchase price given to the acquired, enabling acquirers to take advantage of their high valuations, as opposed to relying on cash only.
That said, Trump's tax policies have not been a driving factor in this past year's mergers and acquisitions deals. According to one expert, this is because the deals have typically been based on benefits resulting from the expected synergies that will take place post-combination, as opposed to a projection of what benefits may come as a result of the new tax rates. Post-tax reform, American companies with lots of cash trapped overseas may more easily engage that capital in the M&A market. On the other hand, Europeans will also be able to utilize the new policies to make more deals with the U.S.