Dell’s $67 billion bid stirs up deal froth

‘Mega-deal’ trend breaks records, alters industry

Dell’s record-breaking $67 billion deal to buy EMC is part of a growing trend toward “mega-deals,” or mergers over $10 billion, that is changing the face of American industry.

Dell’s deal, announced Monday, marks the largest price tag for a technology merger in history — beating out Avago Technologies’ $36.5 billion offer to buy fellow chipmaker Broadcom, ac- cording to research firm Dealogic.

It adds to a record-breaking year for mergers and acquisitions generally.

Globally, M&A are likely to total $3.83 trillion this year, up 4.5% from the previous record of $3.66 trillion reached in 2007, according to research firm Mergermarket. The mania has been driven in part by a growing appetite among large companies for transformative deals costing more than $10 billion.

There have been a record 48 mega-deals totaling $1.35 trillion this year, according to Dealogic. That beats the previous record of 40 deals totaling $1.17 trillion set in 1999, Dealogic said.

The trend has been particularly frothy in tech, which saw five mega-deals deals worth $143.5 billion this year — a record, Mergermarket said. Even before Dell’s lofty bid for EMC, large tech deals hit a new peak, said Kristy Wilson, global research editor for Mergermarket.

By pairing with EMC, Dell aims to grab a bigger piece of the computing pie by merging its core server business with EMC’s complementary, but not overlapping, data storage business.

Similar thinking — that bigger is better, especially when there’s not too much overlap — has been behind a spate of mergers in 2015, including Royal Dutch Shell’s $70 billion bid for BG Group and Charter Communications’ $55 billion offer to buy Time Warner Cable.

Avago’s offer to buy Broadcom exemplifies the growing desire of legacy companies to join forces to compete. Both companies make chips, but Broadcom focuses on chips for wireless devices, whereas Avago focuses more on wired and industrial chips.

Next up: Beer giant AnheuserBusch InBev is courting SABMiller in a marriage that could cost upward of $100 million.

Mega-deals can be risky. In fact, there has been some movement in the opposite direction, especially in tech, as companies seek to whittle down to get an edge, including Dell competitor Hewlett-Packard.

HP is working on a plan to split into separate consumer and corporate computing divisions after going through its own megamerger in 2001 and finding that bigger was not, in fact, better. HP bought Compaq in 2001 for what was then a record $25 billion tech acquisition.

“This is a real opportunity for HP,” the company said in a statement. “Two of our largest competitors are attempting a highly distracting, multiyear merger, just as we are launching two new, focused companies.”

A desire to be more nimble led eBay to spin off payments arm PayPal this year.