MergerMarket Group recently published its July edition of Monthly M&A Insider which reported on mergers and acquisitions activity around the world during the first half of 2016, which was marked by a departure from last year's record highs.
Global deal values fell by 26.8% to US$1.3tn across 7,794 transactions from H1 2015's US$1.8tn across 8730 transactions. The Industrials & Chemicals sector lead the way with US$244bn in transaction value and 1486 deals, despite New Treasury rules aimed at dissuading tax inversions leading to the termination of the US$183.7bn Pfizer and Allergan transaction. Second most active sector has been Energy, Mining & Utilities with US$165.6bn and 603 deals driven by consolidation in the industry. A close third in deal value is the Pharma, Medical & Biotech sector with US$164.3bn and 626 deals, followed by Technology. Business Services place last with only US$121.9bn of deal value but show a high deal volume with 1107 transactions.
While North America posted the lowest figures since 2013, the region nonetheless represented almost half of global M&A deal value and accounted for 2,495 transactions, 416 fewer than in H1 2015. While the M&A overall trend was downward sloping, private equity buyouts rose by 12% to US$73.9bn spearheaded by Apollo Global Management's US$12.3bn purchase of home security provider ADT. Despite the cancelled M&A between Pfizer and Allergan, the Pharmaceuticals, Medical & Biotech sector had the highest deal value in H1 2016, with 258 deals worth US$110bn, representing a 23.6% decrease from the same period of 2015. The most notable deals of the first half of the year in North America included Microsoft's US$25.5bn acquisition of the business social network LinkedIn; Danaher's US$14.8bn spinoff of Fortive; and medical research provider Quintiles Transnational Holdings' US$12.9bn merger with healthcare information company, IMS Health Holdings. On the Canadian side, TransCanada merged with Columbia Pipeline in US$12bn deal to create a big player in the midstream oil sector.
Economic uncertainty in the Eurozone and the UK's decision to "Brexit" caused a slowdown in European M&A activity with deal value dropping 19.3% from US$425bn to US$342bn and a deal count decline of 177 deals to a total of 3,110 deals in 2016. In the UK there was a clear Brexit related slowdown with a decrease of 50.5% of deal value from US$38.2bn in Q1 to US$19.2bn in Q2. By contrast, M&A activity in Germany and France increased by 315.8% and 187.8% respectively in Q2 respective to the Q1 results. China continued to be a major driver of European M&A as Chinese deal activity accounted for 47.6% of total European inbound investment – the highest share of European M&A activity to date. According to MergerMarket intelligence Germany's Industrial sector, particularly automation, semiconductor, and chemical companies are expected to be the most targeted sector in H2 of 2016.
M&A activity in Asia Pacific (excluding Japan) recorded 1588 deals with a total deal value of US$303.2, which is 30,7% downturn in deal value compared to H1 of 2015. While deal flow remained fairly constant, the drop in deal value can be largely explained by fewer mega-deals and a decrease in average deal value from US$290.2m to US$215.8m in H1. Despite the global drop in M&A activity, China posted a Year-on-Year increase of 13.2% to dominate the region with US$35.7bn, comprising 63.6% of total deal value in Asia-Pacific (excl. Japan). In contrast to the global trend, Technology was the dominant sector with 232 deals and US$53bn in value following by the Industrials & Chemical sector with 1362 deals and US$40bn in value benefiting from China's growing demand to upgrade industrial technologies. Private equity recorded the highest first-half value in MergerMarket record, totaling 158 investments worth US$40.2bn which represents a 42.6% increase in value compared to H1 2015. Outbound activity also remained strong with Europe as the top investment destination with 87 deals worth US78.7.bn.
Contrary to the rest of the world, Japan's M&A market soared to US$30.7bn over 199 deals representing a 67.8% increase in M&A deal value from H1 2015. This was Japan's third consecutive year-on-year increase in deal value. While M&A was driven by the Industrials & Chemicals and Pharma, Medical & Biotech industries, performance was strong across the board. Similarly to China, Japan saw an uptick in investment in the European market with deal value increasing to US$4.5bn in Q2 from US$2bn in Q1.
The author would like to thank Hugo Margoc, Articling Student, for his assistance in preparing this legal update.
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