Services Dominate Global Mergers and Acquisitions1 2 3 4 5 6 >>
Nov 6, 2000
In 1999 60% of the value all cross-borders sales of firms were in the services sector according to data published in the World Investment Report 2000 prepared by UNCTAD and released in October (link to UNCTAD WIR 2000 at the end of this report). This result confirms a growing trend that started in the late 1980s when services sector mergers and acquisitions (M&As) accounted for roughly 28% of all acquired firms and follows a wave of liberalization, deregulation and privatizations that took place across the board earlier this decade (Graph1). Almost 40% of the value of all M&As by industry of seller in 1999 took place in the telecommunications and transportation sector. Although the number of deals in this industry grew steadily during the last decade following the sale of state owned companies, the recent increase in the value of M&As is due mostly to a small number of high-value and strategically motivated deals such as the $60 billion AirTouch Communications acquisition by the Vodafone Group PLC of the UK.
Graph 1. Services Industries M&As as Percentage of Total
Source: World Investment Report 2000. Data from Thompson Financial M&As Database
Financial services continued to play a prominent role in M&As activity in 1999 with deals worth over US $110 billion or 26% of all sales of services sector companies. In the last decade this industry has ranked first in M&As activity both in developed and developing countries. Consolidation in the banking, investment and insurance business, and the need to spread the costs of large investments in new information technologies has motivated a large number of deals. Acquisitions and mergers in the aftermath of the Asian financial crises and earlier bank failures in Latin America reinforced the importance of financial sales in overall M&As activity in the 1990s.
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