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From Anheuser-Busch InBev To Dow Chemical: A Look At The Year In Mergers


2015 could be called the year of the megamerger. This month, Dow Chemical said it would merge with DuPont to make a $130 billion empire. Earlier this fall, it was beer giant Anheuser-Busch InBev buying rival SABMiller for nearly $108 billion. NPR's Yuki Noguchi explains the forces that drove the year's deal making.

YUKI NOGUCHI, BYLINE: Worldwide, more than $4.3 trillion worth mergers and acquisitions were announced this year - well over half that involved U.S. companies. Laura Miles is head of global mergers and acquisitions at Bain & Company.

LAURA MILES: The global deal value will surpass not just 2014 but will be the highest year ever on record, topping the last peak in 2007.

NOGUCHI: In all, there were more than 10,000 U.S. mergers this year, according to Dealogic - that may sound like a lot but was fewer than last year. The biggest takeaway is that the average deal this year was far bigger. Miles says 58 mergers were valued at over $10 billion. She says companies were driven partly by a lack of consumer demand around the world. But at the same time, companies had a lot of cash on hand. And if they needed to borrow, loans were cheap, too.

MILES: Companies are struggling with growth, both in working Western markets and as the developing economies have slowed. So this is causing them to look at acquisitions as a primary way to grow earnings.

NOGUCHI: Neil Dhar is deals partner for PricewaterhouseCoopers.

NEIL DHAR: I think CEOs were operating with more confidence than they did several years ago. And I think boards and shareholders are expecting growth.

NOGUCHI: And the easiest way to increase sales was to acquire them. Flat alcohol consumption in AB Inbev's markets, for example, made buying rival SABMiller, which operates in other developing markets, more attractive. Deal analysts also say 2015 will go down as a year when activist shareholders made their mark. Activist investors agitate for more change that they believe will lead to higher stock prices. They do so by putting pressure on boards of directors. Shareholder activism was instrumental, for example, in Dow Chemical and DuPont's $130 billion merger. Some activists pushed the company to merge, then split into three independent companies, an idea the management eventually embraced. Christopher Davis is legal counsel to activist shareholders in mergers and acquisitions.

CHRISTOPHER DAVIS: And I think what you're really seeing is there is less deference to the boards and to management.

NOGUCHI: He says activist shareholders are increasingly clamoring for companies to consider big changes, including mergers.

DAVIS: I think you're seeing limited patience and a real demand for results.

NOGUCHI: There's also some contagion when it comes to deal making. Rivals sought to keep up with each other's buying sprees by snapping up other properties. This was especially true among semiconductor and drug companies. Richard Jeanneret is vice chair of the mergers and acquisitions division of Ernst & Young.

RICHARD JEANNERET: I don't think people want to be left behind.

NOGUCHI: In the pharmaceutical industry, for example, Pfizer struck the year's largest deal, agreeing to buy Allergan for $160 billion. That was the culmination of several other large deals, including Actavis' purchase of Allergan earlier this year before being acquired by Pfizer. Jeanneret says in general, investors validated these deals by trading up the companies' stocks.

JEANNERET: And once they start to have success and the market rewards them, there's bit of a meet you mentality that follows.

NOGUCHI: Experts say they expect all the trends that drove this year's mergers to continue into next year. Low energy prices could also drive more sales as distressed energy firms make them attractive targets. Yuki Noguchi, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

Yuki Noguchi is a correspondent on the Science Desk based out of NPR's headquarters in Washington, D.C. She started covering consumer health in the midst of the pandemic, reporting on everything from vaccination and racial inequities in access to health, to cancer care, obesity and mental health.
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