Global M&A market on track for best year since 2008

10 November 2015 Consultancy.uk

Total M&A deal value is projected to hit the highest level since the crisis, at close to $4 trillion. North America is showing high deal values this year, with 30 megadeals of more than $10 billion. The most active sectors to date in 2015 are technology & media, and energy & utilities, both buoyed by mega deals in the range of $80 billion. As has been the case for years, the large American investment banks and the Big Four dominate the landscape for financial advice on deals, with PwC on top of deals by volume, followed by Goldman Sachs and Morgan Stanley.

Each quarter Mergermarket, a platform that focuses on the M&A domain, releases a report into the years’ M&A activity*. The platform’s latest report shows that across the board the global M&A market has reached the highest point since the 2008 financial crisis. Last year almost $3.4 trillion in deals were struck, representing gains of 47% on 2008 when 10,689 deals worth $2 trillion were made. And this year is likely to fall out even higher, as in the first three quarters of 2015 total deal value has already been running 21% ahead of the same period in 2014, with 11,754 transactions worth $2.9 trillion compared to 12,772 deals worth $2.4 trillion. If the same pattern as last year is booked in the final quarter of this year, then total deal value may reach close to the $4 trillion mark.

Global M&A trend

In terms of location, the majority of deals occurred in North America, with value up slightly to $1.5 trillion while volume has been down slightly to 4,450 deals. Total US deal value has been pushed up by the high number of mega-deals, with the year-to-date recording a total of 30 megadeals (above $10 billion) worth a combined $753.3 billion, involving only US-based targets. Europe has seen $657 billion in deals, while the Asia-Pacific region (excluding Japan) has seen 21% of all deals, with a total value of $614 billion – both deal value and volume are up on last year.

Regional breakdown global M&A

The results confirm the picture of an improving M&A market, and are in sync with a forecast released by EY in May this year, which highlighted that executives’ appetite for mergers & acquisitions has reached its the highest point in five years. Differences across industry are evident though, says Mergermarket, with particularly the Technology, Media and Telecoms (TMT) sector capturing a large number of the total number of deals (22%; deal value of $530.7 billion). The Time Warner Cable acquisition by Charter Communications worth $77.8 billion was the largest transaction in the industry, slightly smaller than the megadeal between Netherlands-based Royal Dutch Shell and UK-based BG Group, worth $81.2 billion. The Energy, Mining & Utilities (EMU) sector comes in second with a 20% market share, followed by the Pharma, Medical & Biotech and Financial Services industries respectively.

GLOBAL M&A SECTOR BREAKDOWN 2015

Private equity in M&A market
Thus far this year, private equity added 1,722 buyouts worth $277 billion to the overall global deal value. Compared to last year’s first nine months, the number of buyout deals decreased by 14%, although last year was a
bumper year for PE entities, on the back of strong demand from corporates and high levels of available dry powder. Exits have seen 1,538 deals worth $301 billion, a drop down in deal value by 24%, and 4.7% in volume compared to the same period in 2014. Despite the decline, it is likely that the PE global trend will still see this year out above the years 2010 - 2013.

GLOBAL PRIVATE EQUITY TREND

Financial advisors
PwC leads the pack in terms of deal count this year, financially advising clients on 254 of the total deals done – although the value of deals remains relatively low compared to investment bankers, reflecting the firm’s advisory role as opposed to the commission based fees received by the bankers. Three US-based banks follow the Big Four: Goldman Sachs, Morgan Stanley and J.P. Morgan. KPMG comes in at number 5 so far this year, advising on 197 deals, while professional services firm EY is set to retain its number 7 spot with 176 deals. Deloitte comes in one spot behind EY with 175 deals so far this year.

TOP 20 GLOBAL FINANCIAL ADVISERS

United Kingdom
In the first nine months of 2015, the UK saw an impressive increase in value with 993 deals worth $254 billion, already exceeding entire 2014 figures when 1,401 deals were valued at $155 billion, representing a value increase of 63%. The UK has always been a key market for investors but during the first three quarters of 2015, it accounted for a record market share in European M&A at 39%, considerably higher than the 15% during YTD 2014. The country is home to the fifth largest deal in Europe so far this year, following Telefonica’s decision to sell O2, Britain's second-largest mobile operator, to Hutchison Whampoa, the owner of rival operator Three, for £10.25 billion.

* The analysis by Mergermarket examines deal values greater than or equal to $5 million across the world.

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