Global dealmaking is recovering after a first-quarter slump caused by Russia’s invasion of Ukraine.
April M&A rose 30% from March to $387 billion, and included mega deals such as Elon Musk’s $44 billion buyout of Twitter and a 58 billion-euro ($61.04 billion) bid by a consortium for Italian airport and motorway operator Atlantia.
Now the M&A market faces another challenge – funding.
Globally, more than $400 billion worth of deals have been announced since January but not completed, Refinitiv data shows.
M&A deals typically include ‘staple financing’, a pre-arranged package offered to potential purchasers to finance the acquisition. Once the deal is agreed, the buyer can syndicate the financing, inviting other banks to join. Or it can tap bond or equity markets.
But funding costs have spiralled since the deals were agreed. Average global corporate debt yields have soared 100 basis points since the Feb. 24 invasion, and by 150 bps on junk-rated U.S. companies, ICE BofA indexes show.
That’s left some enormous deals hanging. They include Microsoft’s purchase of Activision Blizzard, Musk’s Twitter acquisition and an investment by Macquarie and the British Columbia Investment Management into Britain’s National Grid.