(Photo by Jazz Guy under CC BY 2.0)

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As Russian revolutionary Vladimir Lenin put it: “There are decades when nothing happens; and there are weeks in which decades pass.”

This is one of those weeks. On Monday, Chevron announced it would take over the energy company Hess for $53 billion. It’s the latest megadeal in a busy industry this month, and it comes during one of Wall Street’s most pronounced deal droughts in recent memory.

Oil slick

For all the talk of an impending green revolution, fossil fuel companies aren’t going to give up, at least not anytime soon. The International Energy Agency still expects demand for oil and gas to increase sharply in the coming years (although it will peak before the end of the decade). Chevron’s acquisition of Hess – which came at a price of $171 per share, or a 10% premium to the target’s 20-day average – gives the company access to Guyana’s oil fields, one of the largest global discoveries the industry this decade, as well as to the Bakken Shale formation of North Dakota. Accordingly The Wall Street JournalSome analysts believe Hess, Chevron and Chinese partner Cnooc’s combined control of about a third of Guyana’s oil supply could be worth $180 billion by 2027.

And that’s not even the biggest energy deal this month. The war in Ukraine brought record profits to major industry players last year, and now that money is being used for a number of big deals. Just two weeks ago, Exxon announced a massive $60 billion purchase of shale oil company Pioneer Natural Resources, marking the largest oil and gas deal in decades.

The activity has revitalized a near-dormant M&A space, where deal value has plunged about 30% so far this year:

  • More than $139 billion in takeovers of listed U.S. companies have been recorded so far in October, roughly tripling from a year ago and the highest amount in a month since June 2019, according to a Bloomberg analysis published on Monday.
  • In addition to the two big oil deals, drugmaker Roche announced a $7 billion takeover of colorectal treatment company Telavant on Monday, while Disney said it was close to a multibillion-dollar sale of its Indian properties to Mumbai-based Reliance Industries.

The Goldman touch: Goldman Sachs may be rapidly exiting the consumer banking space, but it’s still king when it comes to M&A advisory services. According to Bloomberg, the company has had a global market share of 26% so far this year, ahead of Morgan Stanley’s 22% and JPMorgan’s 21%.

Khan, are you into this? Perhaps this is fueling the M&A boom: the reality that FTC Chairwoman Lina Khan’s antitrust bluster is more bark than bite. Microsoft just completed its $69 billion purchase of video game giant Activision Blizzard, meaning Khan has lost the battle to prevent the biggest merger in tech industry history.

Source : www.thedailyupside.com

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