In the world of mergers and acquisitions, it seems that large corporations are willing to wheel whether the economy and the stock market are strong or weak. The reality is that more mergers happen in good times than bad, in part because it’s hard for management to justify a sale of the company to shareholders if the value has dropped handily. Now that the bull market is over a decade old and the economic recovery is on rocky ground, some of the waves of mergers and acquisitions may have a lasting impact on how some of the top companies in corporate America are to be viewed.
Some mergers are motivated by an ability to get more growth, but some mergers are defensive and viewed as the keys to future survival. Throughout 2018 and 2019, there have been a combination of rationales as the driving forces behind those mergers.
24/7 Wall St. has been tracking merger and acquisition (M&A) activity since its inception. The raw value of deals that have closed in 2018 and that are pending at this time in late 2019 makes the private equity acquisition bubble before the Great Recession look insignificant. If even a few more game-changing mergers are made in the next 12 to 18 months, it would be conceivable that $1 trillion worth of deals could have closed within just three or four years. For some scope and reference, note that the U.S. entire gross domestic product is now $21 trillion.
Many mergers have been announced or have closed, but just seven recent and pending deals have transformed how analysts and investors alike are having to view corporate America. Business models are becoming more complex, and some of these mergers may mitigate some of the changes that are desired by some politicians. Companies haven’t forgotten the rule that their businesses, or their entire business sectors, have to adapt and change as times change. Some of those changes have to occur in a very short period.
Some mergers seem hard to justify at first glance. After all, those “efficiencies” often come with layoffs, restructurings, forced moves on a workforce and other unpleasantries. Still, companies know that they need to defend their moats, and they better be ready for the next recession, whenever that actually arrives.
Here are seven recently closed and pending mergers that are changing the face of corporate America and that will likely force other competitors into more M&A activities ahead.
Big Pharma and Biotech
Bristol-Myers Squibb Co. (NYSE: BMY) is not the first member of Big Pharma to make a large acquisition in biotech, but the size of the acquisition of Celgene Corp. (NASDAQ: CELG) at somewhere close to $70 billion hadn’t really been seen in biotech since Roche bought Genentech for close to $50 billion a decade earlier. Celgene shares increased over 400% from 2010 through 2017, but its rise began to lose some steam as its revenue growth began to normalize.
Now the company has sold off the rights to Otezla for psoriasis in a rather impressive $13.4 billion sale to Amgen Inc. (NASDAQ: AMGN) that is among the largest biotech deals on its own. Amgen is currently the largest pure biotech by market cap, with a $125 billion value, and that’s larger than Bristol-Myers Squibb’s $78 billion value, before considering the Celgene deal.
Insurance and Health Care
CVS Health Corp. (NYSE: CVS) transformed itself into a powerhouse upon closing its acquisition of health insurance provider Aetna in a $69 billion merger in a deal that closed in late 2018. CVS has seen its shares pull back in 2019, in part on the fears of “Medicare for all” that some of the Democrats are pushing for in their 2020 campaigns. CVS had transformed itself a decade earlier with the acquisition of Caremark, a leading pharmacy benefits manager, in an all-stock acquisition that was valued at $21 billion when the deal was announced.