Resurgence of Global Mergers and Acquisitions

Added by Gary Dunn on September 26, 2010

After two slow years, banks are gradually opening up their lending capacity to finance large acquisitions worldwide. Also cheaper lending rates are creating more opportunities for potential buyers.

With banks willing to lend billions of dollars to credit-worthy buyers, there seems to be the possibility of a resurgence of deals which were earlier put on hold due to scarcity of funds and/or high costs of borrowing.

The head of EMEA for Europe, the Middle East and Africa at JPMorgan, Ray Doody, said that deals worth over $30bn are possible for good credits that have strong relationships.

Thomson Reuters reported that global M&A this year has risen by 21.2 percent amounting to a whopping $1.68 trillion. This quarter has recorded the largest growth since the collapse of Lehman Brothers two years back.

BNP Paribus SA had been the busiest bank for this year’s EMEA loans, followed by JPMorgan Chase and Co. JPMorgan Chase is backing a $45 billion deal of Potash Corporation of Saskatchewan Inc. acquisition by BHP Billiton.

Lending rates are also lower, and BHP Billiton, even after paying premiums over lending rates, is paying only half of those paid by similar credit-worthy companies last year. In fact, in this quarter, A-credit borrowers have paid about 71.7 bps over lending rates as compared to 143.3 bps last year.