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This year saw some very large corporate mergers and goobers with the still pending Comcast Time Warner Cable deal topping the list. Globally there were $3 trillion worth of deals announced the 2014; the biggest year for mergers and acquisitions since the financial crisis. NPR's Yuki Noguchi reports the trend is expected to contend.
YUKI NOGUCHI, BYLINE: Ever since the great recession, there's been a big chill on mergers and acquisitions as companies and banks hoarded their cash. This year, that changed. It wasn't the number of deals that was impressive; it was the large sums involved. And they included some big names. Reynolds American buying smaller tobacco Lorillard for $28 billion. And Burger King closed on its deal to buy Canadian coffee and doughnut icon Tim Hortons for $11 billion. David Harding leads corporate mergers and acquisitions for Bain and Company. To him, this was all fairly predictable.
DAVID HARDING: The M&A industry is highly cyclical. It's a little bit like sunspots.
NOGUCHI: And this year's flare-up, he says, was driven in part by companies' huge cash coffers.
HARDING: There is a tremendous amount of capital sloshing around in the world looking for a home.
NOGUCHI: Harding says the economy is improving, but companies in the U.S. and Europe are finding it hard to grow organically, as they say in business circles. So instead, Harding says they're looking at targeted acquisitions. In one of the year's biggest, Facebook bought messaging software firm WhatsApp for an eye-popping $22 billion.
Drug firm Actavis announced plans to buy both Allergan and Forest Laboratories this year, as pharmaceutical companies tried to buy their way into new markets and expertise.
The corporate merger trend is likely to continue, says Harding. The dramatic fall in oil prices is setting the stage for still more mergers among some companies in the energy and manufacturing sectors.
HARDING: My sense is that 2015 will be a bigger year than 2014.
NOGUCHI: Richard Jeanneret agrees.
RICHARD JEANNERET: To use a baseball analogy, we're in the early innings.
NOGUCHI: Jeanneret is a vice chair of a division of Ernst & Young that advises clients on deal making. He says he expects more midsize companies to get in on the action next year, making it a bigger year for mergers and acquisitions overall.
A number of this year's deals, including Burger King and Tim Hortons, caused a big stir because they involved U.S. companies buying smaller firms then moving headquarters abroad to avoid paying higher U.S. corporate taxes. The practice, known as tax inversion, prompted the Obama administration to change the tax rules in September.
That change scuttled the year's biggest announced deal - drug maker AbbVie's plans to buy the U.K.-based firm Shire for $54 billion. AbbVie publicly criticized the administration. But Jeanneret says tax inversions were not a major factor in this year's deals.
JEANNERET: It makes for great fodder. It's clearly been present in some very large transactions. But the reality of it is the volume is extremely low.
NOGUCHI: In the past, some companies have been burned by bad deals. But Jeanneret says companies are vetting deals more carefully than they did a decade ago.
JEANNERET: At that time, they were responding to market pressures to be bigger. Now, you know, the marketplace wants greater focus.
NOGUCHI: So sometimes, that means merging. But sometimes, as was the case this year with eBay and Hewlett-Packard, it means spinning off old acquisitions that didn't work out. Yuki Noguchi, NPR News, Washington.
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