Today: The amount of cash changing hands in the first half of 2014 doubled as low interest rates, record cash reserves and booming stock prices led to mega-deals, PwC reports. Also: Apple reportedly joins in the acquisition race and continues to head toward record stock prices.
The Lead: M&A activity reaches highest total since before recession
Acquisition activity reached nearly $1 trillion in the first half of 2014, the largest total since before the Great Recession ravaged the global economy, and a hot tech market in Silicon Valley along with consolidation trends in other sectors is likely to keep cash flowing.
PwC reported Monday that U.S. companies announced $982 billion in mergers and acquisitions during the first six months of 2014. That's nearly double the $570 billion recorded in the same period in 2013 and the most since the first half of 2007, just ahead of the collapse of the U.S. economy.
Surprisingly, the total value of deals in 2014 shot up while the number of mergers and acquisitions was steady from the first half of 2013, showing the trend toward mega-mergers with high price tags, such as Facebook committing $16 billion for mobile-messaging service WhatsApp and Google picking up Nest Labs for $3.2 billion.
PwC deals partner Mark Ross credited the turnaround to record corporate cash reserves, all-time-high stock prices and low interest rates. Silicon Valley's largest 150 tech companies began the year with $500 billion in cash sitting in bank accounts thanks to record profits in 2013, providing plenty of ammunition for deals, and overall corporate cash reserves are also at record levels.
"We've got a lot of cash, we've got a very, very strong stock market, making stock a currency, and then you combine that with really favorable financing and you've got a strong (M&A) market," Ross said.
Prominent Silicon Valley acquisitions have been dwarfed by giant consolidation in the communications industry -- Comcast has agreed to buy Time Warner Cable for $45 billion and AT&T is attempting to take over DirectTV for $48.5 billion -- as deals of more than $10 billion accounted for almost half the total PwC tracked.
"The value impact is coming from the impacts of the larger telecom deals -- that's what driving the value equation during the first six months," Ross, who is based in San Francisco, said Monday in a telephone interview.
The acquisition market is unlikely to cool down -- just Monday, real estate services website Zillow announced an agreement to purchase San Francisco-based rival Trulia for $3.5 billion, and Dollar Tree completed a deal for rival discount chain Family Dollar for $8.5 billion. With Wall Street showing few signs of a huge dive, all-stock transactions such as Zillow's move for Trulia could continue the trend of increasing tech acquisitions -- in the technology sector, Ross said the volume of deals is up 11 percent year-over-year, while the value is skewed by Dell's 2013 move to go private for $24.4 billion.
Foreign acquisitions have made up a large portion of the activity, with cross-border deals more than tripling from $98 billion in the first half of 2013 to $308 billion this year as companies look to spend cash collected overseas on foreign companies rather than face repatriation taxes for bringing it back to the United States. Google, for instance, has publicly disclosed that it has $30 billion in cash stashed overseas for the express purpose of purchasing foreign companies, as it did with the purchase of Israeli mapping application Waze last year, and companies in other sectors are drawing politicians' scorn for acquiring large companies and adopting their headquarters to avoid U.S. taxes even more.
"Companies are proactively looking for opportunities to grow, expand their footprint and adapt to changing industry and macroeconomic trends to position themselves for the future," Martyn Curragh, PwC's U.S. Deals leader, said in Monday's news release.
SV150 market report: Apple gains after reports of two content-related acquisitions
Stocks changed little Monday on Wall Street, but Silicon Valley tech stocks gained at a healthy 0.5 percent clip led by Apple, which once again moved toward record high prices amid its own small acquisitions spree.
The Cupertino technology powerhouse has picked up two startups that aimed to bring different types of media to consumers, according to reports. TechCrunch said late Friday that Apple purchased BookLamp, which seeks to recommend books to readers based on similarities with previously read books, similar to Pandora's music recommendation engine; Apple gave its standard noncommittal confirmation to the tech blog, which reported a purchase price of $10 million to $15 million. Monday morning, Recode reported that Apple had agreed to spend $30 million for Swell, a podcast app that attempts to be the same type of recommendation engine. Earlier this year, Apple made the biggest acquisition in its history, the $3.2 billion purchase of Beats, and that move received approval from the European Union's antitrust agency Monday. Apple's stock moved to its highest intraday and closing prices since 2012, after adjusting for its recent stock split, and continued its run toward $100 by gaining 1.4 percent to $99.02.
After agreeing to Zillow's acquisition overtures, Trulia zoomed 15.4 percent higher Monday to close at $65.04, the biggest percentage leap in the SV150. The only airline to call Silicon Valley home, Burlingame-based Virgin Airlines, filed for a $115 million IPO, joining a crowded IPO pipeline that is expected to see more than 20 companies go public this week, including four Bay Area biotechs. Google gained 0.2 percent to $599.02 after Spain passed a law that seeks to tax the company for linking to news content, and Twitter declined 0.6 percent to $37.93 ahead of its earnings report, expected after the bell on Tuesday.
Up: Apple, Google, Oracle, HP, eBay, Gilead, Juniper, Netflix, Zynga, LinkedIn, Tesla
Down: Intel, Cisco, Yahoo, Facebook, Twitter
The SV150 index of Silicon Valley's largest tech companies: Up 7.32, or 0.47 percent, to 1,566.17.
The tech-heavy Nasdaq composite index: Down 4.65, or 0.10 percent, to 4,444.91.
The blue chip Dow Jones industrial average: Up 22.02, or 0.13 percent, to 16,982.59.
And the widely watched Standard & Poor's 500 index: Up 0.57, or 0.03 percent, to 1.978.91