May brought slowdown in large M&A deal announcements

Announcements of large M&A transactions slowed in May after a quick start to the year.

ConocoPhillips' $22.53 billion deal to acquire Marathon Oil Corp. was the only global M&A transaction of $10 billion or larger announced in May. That ended a streak of five straight months in which at least two $10 billion-plus M&A transactions were announced.

Still, with 14 such deals announced through the first five months of 2024, the year is on pace to record the highest number of $10 billion-plus deals since there were 37 deals in 2021.

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Oil rich

ConocoPhillips' deal for Marathon Oil is the latest in a string of large transactions in the oil and gas space. Since the start of the fourth quarter of 2023, the energy and utilities sector has accounted for seven transactions of $10 billion-plus, and all of the companies have been from the oil and gas industry.

During that same period, financials produced the second-most deals above $10 billion with five. Those have been spread across four different industries: asset management; insurance broker; payment processors; insurance broker; and investment banks, brokers and capital markets. The total announced value of the five financial sector transactions is $90.28 billion, less than half of the $214.77 billion total from the seven energy and utilities deals.

The consolidation of large operators in the US upstream oil and gas industry has driven the high deal value total in the energy sector. Acquirers have been pushed to pay up partly because of a lack of high-quality targets.

Some of the transactions have faced obstacles.

Exxon Mobil Corp. is involved in a dispute over Guyana offshore oil fields that threatens Chevron Corp.'s pending $53 billion acquisition of Hess Corp. Also, the US Federal Trade Commission has requested additional information on multiple energy deals. However, a positive sign for the deals receiving regulatory backing came with the May approval of one of the transactions, Exxon Mobil's $65.32 billion deal for Pioneer Natural Resources Co. That sale ranks as the largest global M&A deal announced since the start of 2023.

Regulatory outlook

Across all sectors, US antitrust authorities have increased their scrutiny of M&A transactions under President Biden's administration. But companies have shown that deals can survive antitrust challenges. In one of the more notable examples, Microsoft Corp. prevailed in a court battle with the Federal Trade Commission to allow its $68.99 billion acquisition of Activision Blizzard Inc.

Even though companies have proven that they can win court cases, not all want to take on challenges, Evercore Inc. Chairman and CEO John Weinberg said during a June 11 investor conference presentation. This has prevented some large deals from being pursued.

"The bigger deals, especially in healthcare and tech, are harder," Weinberg said. "And I think that there is a chilling effect by this regulatory regime."

Even more companies could hit the pause button as the US elections nears.

"The closer we get to an election, the more people are going to hold back and wait and see what happens," Weinberg said.