$1.3 trillion dealmaking frenzy isn't slowing down

Microsoft agreed to buy artificial intelligence developer Nuance in a deal worth $19.7 billion, including debt. CNN's Clare Sebastian explains.

Posted: Apr 13, 2021 5:11 AM
Updated: Apr 13, 2021 5:11 AM

No one knows for sure what the post-coronavirus era holds. But businesses are doing their best to get ready, announcing a wave of mergers and takeover bids designed to prepare them for what's next.

What's happening: Global mergers and acquisitions worth $1.3 trillion were announced during the first three months of the year, according to data from Refinitiv. That's a 94% increase compared to one year ago, and the strongest opening period since records began in 1980.

It's the third quarter in a row that dealmaking has come in above $1 trillion.

The tech sector has been particularly hot. During the first quarter, it registered $274 billion in deals, more than triple 2020 levels.

Then there were mergers with special-purpose acquisition companies, or the buzzy "blank check" firms that raise money from investors and then hunt for a takeover target. According to Refinitiv, SPACs played a major role in the quarter's powerhouse performance, with 110 combinations worth $232 billion announced.

The boom is great news for investment banks, whose employees have had to pull long hours to organize and execute the deals. Refinitiv estimates that global investment banking fees topped $39 billion during the first quarter, the strongest period on records dating back to 2000.

JPMorgan Chase is at the top of Refinitiv's league table, followed by Goldman Sachs and Morgan Stanley. All three banks report earnings this week.

The second quarter is already shaping up to be incredibly strong, too.

On Monday, Microsoft announced that it was buying artificial intelligence developer Nuance in a deal worth $16 billion, excluding debt. It's Microsoft's second-largest acquisition ever, behind only its $26 billion purchase of LinkedIn in 2016.

The move is expected to help solidify Microsoft's growing influence in the health care industry. Nuance's technology helps medical professionals with patient intake, documentation and telehealth — big growth areas for the sector, particularly during a pandemic.

SPAC mergers will continue to play a major role. On Tuesday, Grab said it will merge with a US-based SPAC backed by Altimeter Capital in a deal that would value Southeast Asia's premier ride-hailing and food delivery service at nearly $40 billion.

The Grab merger is the biggest blank-check deal ever, according to Dealogic.

"The US listing is important because it gives us access to the widest global base of liquidity," Grab co-founder Tan Hooi Ling told CNN Business.

Bitcoin hits a record high ahead of Coinbase's public debut

Bitcoin has rocketed to a new record above $62,700 as investors gear up for this week's eagerly-awaited stock market listing of cryptocurrency exchange Coinbase.

Big picture: The currency first topped $60,000 in early March amid signs that it would gain more mainstream acceptance as a store of value. It now has a market value of roughly $1.2 trillion.

Coinbase's debut, set for Wednesday, is a big catalyst for this week's gains. The company, which is profitable and has reported strong revenue growth, is valued at nearly $68 billion, according to recent private stock trades.

"The Coinbase direct listing is a major milestone for the crypto industry," said Carlos Domingo, CEO of Securitize, a digital asset securities firm. "It will allow investors to gain exposure to the business without having to own actual cryptocurrencies."

But despite growing interest in cryptocurrencies as an asset class, not all investors are bullish.

According to a global survey of fund managers published by Bank of America on Tuesday, 74% of those polled think bitcoin is in a bubble. Just 7% say the same about the stock market.

IBM spinoff joins long list of questionable corporate names

What's in a name? For "Kyndryl," it seems, plenty of mockery.

The name of the IT services unit that IBM is spinning off from its core business is certainly a head scratcher. Soon, the 90,000 employees affected by the change will no longer say they work for "IBM." In fact, they may struggle to say the name of their employer altogether.

The scoop: IBM says "kyn" is derived from is the word "kinship," and "dryl" comes from tendril, which it said should bring "to mind new growth and the idea that ... the business is always working toward advancing human progress." Okay, sure.

An expert in the field told my CNN Business colleague Chris Isidore we shouldn't have too much fun at Kyndryl's expense.

"It's not easy to come up with new names," said Bernd Schmitt, a professor of marketing at Columbia University. "Many good names are already taken and protected by law."

Over time, even a name that may seem strange to consumers can be accepted and embraced. "Häagen-Dazs," Schmitt pointed out, is a collection of made-up words that mean nothing. Even "Verizon," the name given the company formed by the 2000 merger of Bell Atlantic and GTE, raised eyebrows at first. Now it's an established brand that few think twice about.

Up next

The US Consumer Price Index, a key measure of inflation, posts at 8:30 a.m. ET.

Coming tomorrow: Earnings season kicks off with results from Goldman Sachs, JPMorgan Chase and Wells Fargo.

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