MergerMarket Group recently published its September edition of Monthly M&A Insider which reported on mergers and acquisitions activity around the world for the month of August 2016. More than two thirds into the year, August was no exception to the recent rather sluggish growth in M&A activity, especially compared to the record-breaking year for M&A in 2015.
August saw a total of 946 deals worth US$182.2bn, the lowest-valued August since 2013 (US$152.7bn) and down 34.7% from August 2015's US$278.9bn. The Energy, Mining & Utilities sector spearheaded activity by contributing 15.8% to the total global market share with 84 deals worth US$28.8bn, despite a 28.1% drop compared to August 2015. The most notable transactions in the sector were JX Holdings' acquisition of Japan-based TonenGeneralSekiyu KK for US$6.3bn and Tesla's acquisition of US-based SolarCity worth US$5.3bn. The Pharma, Medical & Biotech sector recorded the largest deal of the month with Pfizer's acquisition of US-based biopharmaceutical company Medivation for US$13.2bn. Global cross-border M&A saw 295 deals worth US$52.4bn, a 29% decrease in deal value compared to August 2015. Similarly, domestic M&A lost 36.7% of its value from last year and dropped from US$205.1bn in August 2015 to US$129.8bn in August 2016. However, the September announcements of Enbridge acquiring Spectra Energy for US$40.7bn and the merger of equals between the fertilizer giants Agrium and Potash worth US$36bn are likely to pad the statistics of M&A activity in Q4 of 2016.
With 281 deals worth US$82.5bn, North America posted the fourth highest-valued August since 2007, largely driven by the Pharma, Medical & Biotech sector with 31 deals worth US$19.5bn (125% increase). On the other hand, the middle market was down by 25% closing 94 deals with total value of US$7bn, and private equity buyouts were down by 19.3% in value with 74 deals worth US$13.7bn. While Canada only contributed 4.8% to North American M&A activity, the 40 Canadian deals worth US$2.2bn signified an increase by 79.5% compared August 2015.
Economic uncertainty in the Eurozone and the UK's vote to "Brexit" continue to depress European M&A activity. Performance in the second quarter was unusually weak (down by 5% in deal value from Q1); however, the Brexit related slowdown weakened the British Pound which lead to increased overall activity in Q3 and may in turn drive M&A activity in the final quarter. In terms of value, the Industrials & Chemicals sector lead the way in Europe with 62 deals worth US$6.6bn, representing a 30.1% increase by deal value compared to August 2015. The US$3.2bn acquisition of Switzerland-based Valves & Controls segment of Pentair Plc by Emerson Electric Co. was a major contributor to the upswing in the sector. Inbound and outbound M&A, while still strong with 65 deals worth US$11.5bn and 54 deals worth US$8.5bn respectively, both significantly decreased in value compared to August 2015.
M&A activity in Asia Pacific (excluding Japan) recorded 269 deals worth US55.3bn, which is a decrease of 7.9% in deal value compared to last August. The region's largest deal of the month was Grasim Industries' US$8bn takeover of Indian conglomerate Aditya Birla Nuvo. The transaction catapulted India to a monthly deal value pf US$15.5bn, the country's highest monthly value on MergerMarket and a year-on-year 654.4% increase. Overall, India made up 28% of the region's total deal value, second highest in the region. M&A in Asia-Pacific continues to be dominated by China with 53% of the market share driven by a wave of technology M&A with 39 deals worth US$15bn. China's most prominent technology deal in August was Didi Chuxing's US$7bn takeover of Uber China. Overall, inbound M&A remained quiet with only 34 transactions totalling US$3.4bn, equivalent to a 23% decrease compared to last year. Similarly, outbound M&A slowed down by 21.5% year-on-year with a total deal value of US$8.5bn in reaction to uncertainties in international markets according to MergerMarket.
In contrast to the rest of the world, Japan's M&A market continues to boom. In August, deal value surged by a whopping 723.7% year-on-year in 42 deals worth US$7.9bn, driven in part by the Energy, Mining & Utilities sector through the abovementioned merger between JX Holdings and TonenGeneral Sekiyu. The combined company, JXTG Holdings, will control more than 50% of Japan's gasoline market. So far this year, Japanese M&A growth has been mainly driven by Industrials & Chemicals and private equity buyouts with 56 and 32 deals respectively.
The author would like to thank Hugo Margoc, articling student, for his assistance in preparing this legal update.
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