2015 Is Shaping Up to Be a Monster Year for Buyouts

TRURO, CANADA - DECEMBER 11, 2013: Staples retail outlet. Staples is an office supply retail outlet with over 2,000 stores in 26

2015 looks set to be a banner year for mergers and acquisitions. Which is saying something — 2014 was extremely busy in this regard, with total worldwide M&A volume hitting $3.5 trillion. That amount was the highest since 2007, and nearly 50 percent over 2013’s tally, according to Thomson Reuters. North America was responsible for a bit less than half of that total.

That momentum is still strong. We’re only two months into the year, and already several notable deals have been announced. Here’s a look at three; expect this list to grow much longer as the year stretches on.

Staples/Office Depot

The ink is barely dry on the news of this merger, which was agreed to in early February. Using a blend of cash and stock amounting to roughly $6.3 billion, Staples (SPLS) aims to swallow long-time rival Office Depot (ODP).

Staples made an initial grab at its competitor back in 1997, but the deal was shut down by the Federal Trade Commission on the back of anti-competition concerns. Since then, the Internet has provided plenty of competition for both companies. (AMZN) sells office products among its many categories of goods, as do general retailers such as Costco (COST) and Target (TGT).

Regardless, anti-trust concerns seem to be hanging in the air. Neither Staples’ nor Office Depot’s stock price has moved significantly since the buyout was announced. This suggests that investors are still holding their collective breath for indications whether or not it’ll be green-lit by the regulator.

If it does, Staples will certainly be in a better position to compete. But $6 billion-plus is a lot of money, and, Target, et al are tough opponents. It’ll need more than size to win more market share.


Another deal agreed to in February is one in which Expedia (EXPE) will shell out around $1.6 billion for Orbitz (OWW) to become the No. 1 online travel agency in terms of market share.

This was announced mere weeks after Expedia paid $280 million to acquire another famous name in the sector, Travelocity, from its parent company, Sabre (SABR).

Orbitz and Travelocity will have plenty of company in Expedia’s portfolio. Expedia already owns, Hotwire and Trivago.

Expedia’s acquisitions binge is necessary if the company wants to compete as a top online travel agency. The market is being squeezed by suppliers, i.e., the airlines and hotels that Expedia and its ilk need for their business. Many of these are becoming more effective at selling their wares directly to customers, cutting out the middleman entirely.

Meanwhile, small independent operators are creeping up on the market and battling for much of the same business. And another big player, Priceline Group (PCLN), has similarly amassed a collection of noted brands.

So even as a bulked-up company with a fat portfolio, Expedia will have its work cut out for it. This isn’t an easy market to succeed in; we’ll see if the company and its many assets are up to the challenge.

Dollar Tree/Family Dollar

This buyout was the culmination of a takeover fight that lasted several months, and it involved three discount retailers with confusingly similar names.

Family Dollar (FDO) was the target, and its first bidder was Dollar Tree (DLTR). The latter offered around $8.5 billion worth of cash and stock last summer.

That spurred fellow discounter Dollar General (DG) — the largest company of the trio, boasting revenues that roughly equal those of the other two combined — to make a richer offer several weeks later. It bid $9.1 billion, all in cash, for Family Dollar.

But Dollar General could never quite shake concerns that its buyout, if realized, might have necessitated store closings on the back of regulatory antitrust concerns. The combined company would have had roughly $7.3 billion in revenues and almost 20,000 stores in operation, dwarfing Dollar Tree’s $2.1 billion and 5,282, respectively.

So in January, Family Dollar’s shareholders voted overwhelmingly for the apparently safer bid from Dollar Tree. Which, thanks to the acquirer’s substantially higher stock price these days, is now worth around $8.7 billion.

Regulatory advantages aside, the deal looks like a sensible tie-up of two complementary companies: Family Dollar sells name brands at different levels of discounted prices, while Dollar Tree sells products that always cost $1 or less.

“For Sale” Signs?

This is just the tip of what could be a big iceberg. Numerous rumors are swirling around the market regarding potential buy-outs and tie-ups — to name but one, Time Warner (TWX) could prove to be takeover bait following last year’s abandoned buyout bid from 21st Century Fox (FOX).

We almost certainly haven’t seen the last of the big-ticket deals for 2015. Watch this space for more in the coming months.

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