Prospects for 2015 Second-Half M&A Activity

After an extremely strong pace of merger and acquisition activity in the first half of 2015, what’s in store for the second half of the year?

According to a review of historic second half M&A performance it seems reasonable to see a modest gain in deal value in the upcoming six months. Specifically, since 1998, U.S. announced M&A deal value has averaged a 4.7% advance in the second half of the year from the preceding first half. Additionally, the last time U.S. merger activity declined in the second half from the first half was in 2009 when deal value dropped by 19%. To that end, for five straight semiannual periods beginning in in 2010 U.S. M&A deal values have risen with the last three years seeing double digit percentage increases.

To date in the opening days of the third quarter 2015 more than $93 billion in U.S. M&A deals have crossed the wire led by Aetna Inc. (NYSE:AET) entering into a definitive agreement to acquire Humana Inc. (NYSE:HUM) for $34.5 billion in cash and stock on July 2, 2015 and insurer ACE Limited (NYSE:ACE) entered into a definitive agreement to acquire The Chubb Corporation (NYSE:CB) for $28.3 billion in cash and stock on July 1, 2015. Given this quick start to third quarter deal activity the prospects for a second half gain in M&A proceeds looks promising.

Announced U.S. M&A Transactions

Announced U.S. M&A Transactions

As an industry, retailers typically don’t stand out of among the leading areas for corporate cash holdings. Historically, information technology, healthcare and industrials stand out as the top sectors for cash positions on the collective corporate balance sheet. Still, with the all- important holiday shopping season at hand, the Global Markets Intelligence (GMI) research unit thought it of merit to find those retailers experiencing the largest percentage increase year-over-year with regard to corporate cash balances. For purposes of the examination we summed the total cash and short-term and long-term investment holdings for the third quarter 2013 and the third quarter 2014 for retailers in the S&P 500. Next, our investigation called for calculating the percentage difference in cash balances for those two periods. Presented blow are those retailers with increases in cash balance according to S&P Capital IQ data.

Of interest is the fact that the top two retailers with the biggest percentage increases in cash holdings are companies that had been involved in M&A activity either as a buyer or seller. For example, Dollar Tree, Inc. is actively purposing the purchase of Family Dollar Stores in a multi-billion dollar transaction while private equity firm Sycamore Partners entered into an agreement to acquire the remaining 49% stake in Mast Industries, Inc. from L Brands, Inc. subsidiary Intimate Brands Holding, LLC for $85 million on November 4, 2014.

Given investors’ frequent concern about retailers cash balances, below are some names seeing positive trends.

S&P 500  Retailers With Rising Cash Balances

S&P 500  Retailers With Rising Cash Balances

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