A few key findings in the US include:
- A surge from Europe toward US targets, record high deal valuations and exit levels, and a deal count nearing 2007’s peak led US M&A activity to reach a record high last year. Total deal value soared 56.6% from US$ 900.1bn in 2013 to US$ 1,409.4bn in 2014, while total deal count rose 21.5% from 3,937 transactions to 4,782.
- US firms commanded some of the highest deal valuations globally, with average deal values increasing 30.15% in the past year, reaching a record high of US$ 616.3m in 2014. Premiums paid jumped to 29% in 2014, from 26% in 2013, with an EBITDA multiple of 14.5x.
- US private equity exits reached an all-time high in 2014 with 958 deals valued at US$ 262.1bn, up 70.6% by value compared to 2013 (US$ 153.6bn on 735 deals). Along with a general rise in Technology transactions, the past year saw an upswing in exits in the space, reaching the highest deal count and value on record: 292 deals worth US$ 49.6bn, more than double 2013’s value (US$ 24.7bn). In the Pharma, Medical & Biotech sector, the US$ 42.3bn worth of exits in 2014 was 56.1% higher than the previous peak in 2007 (US$ 27.1bn).
Sellers bask in US$ 3,230bn-worth of global M&A activity, only 11.8% less than 2007
A record value for private equity exits, the average price tag at an all time high, and soaring cross-border deal-making, proved 2014 to be a seller’s market. The year ended with US$ 3,230bn-worth of deals, 44.7% above 2013’s total (US$ 2,232.5bn), and down just 11.8% from the last highest annual total in 2007 (US$ 3,660.4bn).
Global M&A value hit a post-crisis high at the end of Q3 2014 and continued to climb towards the third highest annual total on Mergermarket record (since 2001). This came in spite of a reversal of quarterly increases from Q4 2013 to Q2 2014, after which totals fell quarter-on-quarter with Q4 dropping 7.5% from Q3 to US$ 787.8bn.
2014 saw private equity firms choosing to dispose of assets they had been holding onto, resulting in the year seeing record exits by both value at US$ 489.3bn (which soared to 21.4% above 2007’s peak) and number of deals (2,054). Trade buyers led with a record 1,484 transactions worth US$ 367bn. The 271 more deals than in 2013 resulted in a 82.3% higher deal value than 2013’s US$ 201.3bn.
The Consumer sector (US$ 80.9bn) was particularly active with regard to private equity exits, reaching the highest value and deal count on record. Trade buyers swooped in for Consumer companies and took an 89.6% proportion of the sector’s total exits with 182 deals worth US$ 72.5bn, 154.3% higher than the last peak in 2012.
Energy, Mining & Utilities was the leading sector by value with 1,638 deals totaling US$ 632.5bn, up 47.5% from 2013. TMT continued an upswing from 2013, seeing over 400 more announcements and an 18.9% increase by value reaching US$ 604.2bn. However, it was Pharma, Medical & Biotech activity that stole the limelight in 2014.
The Pharma, Medical & Biotech sector accounted for 52.3% of the total value of lapsed deals during the year (US$ 224.1bn), but the resurgence in the sector still amounted to 1,215 deals reaching an all time high value at US$ 379.5bn during 2014. Tax inversions and a global trend towards cross-border M&A resulted in deals in the industry between different countries accounting for a majority share of total deal value at 67.7% with US$ 257bn-worth of deals.
There was an abundance of cross-border deal making overall in 2014, demonstrated by the highest deal count record and the second highest value. The 5,501 deals worth US$ 1,399.7bn increased 82.6% by value compared to 2013 with 630 more announcements.
The size of cross-border transactions played a role in the deal value increase. The average deal size for cross-border deals jumped to US$ 453.9m, up from US$ 291.4m in 2013 and above the 2007 peak (US$ 437.7m).
The inflated deal size was in part due to the sudden attention to US companies from Europe. The total value of deals involving European companies targeting the US hit the highest on record at US$ 259.7bn with 421 announcements. For example, German corporations made three of their largest ever US-based acquisitions during 2014, with all three valued over US$ 12.7bn.
Deal complexity competing bids and possibly the size of deals, could be an explanation for the longer period taken to complete a deal. The average time taken in 2014 was 96 days, the longest time period on record after five annual increases.
Goldman Sachs remained the lead financial advisor league table by value with 378 deals worth US$ 939.9bn, increasing 57.4% from 2013. The firm knocked PwC from the top position in the league table by deal count after advising on 80 more transactions than 2013. The firm jumped from third position in 2013. It was was the lead advisor by value in the US, Europe and also Asia-Pacific (excl. Japan).
The top four firms (Goldman Sachs, JP Morgan, Morgan Stanley, Bank of America Merrill Lynch) all retained the same position as in 2013, but Citi moved into the top five with 224 deals worth US$ 619.5bn.
Jefferies, Perella Weinberg Partners, Societe Generale and Allen & Company entered into the top 20 during 2014.
Europe’s M&A makes a sudden rebound to a post-crisis high with deals worth US$ 901.4bn
After a rather subdued 2013, European M&A activity rebounded strongly in 2014, climbing to a post-crisis high at US$ 901.4bn. This was a 40.5% increase from 2013 (US$ 641.4bn), making it the highest value since 2008 when it stood at US$ 1,003.8bn. Volume was up by a modest 4.8% between 2013 and 2014 (5,816 versus 6,094).
There was a sense of confidence in global boardrooms during 2014 and this filtered through to European targets where the average price paid for a company was US$ 365.4m, the highest in seven years.
On a quarter-by-quarter basis, 2014’s M&A activity got off to a slow start in Q1 with deals valued at US$ 176.5bn, peaking at US$ 312.9bn in Q2, and seeing a decline thereafter to US$ 202.2bn in Q3, and a slight increase in Q4 with US$ 209.9bn-worth of deals.
Some eurozone countries showed signs of recovery. In Spain for example, the US$ 57.2bn-worth of deals increased 77.1% from 2013. The country has a strong pipeline for 2015, although the second half could be more complicated as attention will turn to the national general election.
Private equity exits stood at US$ 165.5bn, a 94.5% surge on 2013 and the highest figure since 2007. The average price paid for an exit exceeded even the peak years at US$ 492.7m. Consumer (US$ 37.9bn) and Industrials & Chemicals (US$ 29.2bn) saw the highest values.
The ongoing consolidation of Europe’s Telecommunication industry saw M&A in the TMT sector worth US$ 168.2bn account for the highest share of Europe’s value, with domestic transactions accounting for most of it (US$ 120.2bn). One of the trends currently shaping the sector is the convergence towards the “quad” model, with operators bundling together internet, TV, landline and mobile services.
The Pharma, Medical & Biotech sector was the second most active in 2014 with US$ 114.9bn-worth of deals reaching the highest on Mergermarket record after a 162.3% jump from 2013.
Europe’s 1,184 inbound deals totaled US$ 320.6bn and reached a record high by both deal value and deal count during 2014 (since 2001). The proportion of total M&A accounted for by inbound activity climbed to a 35.6% peak.
Most of the inbound investment came from US-based companies which accounted for 60.7% or US$ 194.6bn-worth of inbound deals. This was a 80.6% increase from 2013 and also 8.5% above the previous high in 2008 (US$ 179.3bn).
Mirroring the inbound deal flow, 71% of total outbound M&A was also directed towards the United States (US$ 259.7bn), the highest value on Mergermarket record (2001). As a result, after one of the lowest years for European outbound M&A in 2013, outbound activity surged to its highest level since 2007 during 2014 with US$ 365.8bn-worth of deals, up 190% from the previous year.
Further underlining the strong inbound trend, the top three transactions involving non-European bidders targeting European companies all originating from the US – Medtronic’s acquisition of Covidien (Ireland) for US$ 45.9bn; Walgreen’s purchase of the remaining 55% stake in Alliance Boots (Switzerland) for US$ 23.8bn; and General Electric’s acquisition of Alstom’s Thermal & Renewable Power and Grid business (France) for US$ 12.3bn.
France was the target country for two of the top five deals in the region, demonstrating the growth in size of French deals during 2014. As a result, for the first time on record, France was the most active country in 2014 with US$ 161.4bn-worth of deals, the highest value since 2007 (US$ 204.1bn) and a 327.5% surge on 2013 (US$ 37.7bn). The UK was previously the most targeted country in Europe until 2014 even though its M&A value increased by 28.7% to US$ 154.5bn compared to 2013.
Tax inversion deals boosted total Pharma, Medical & Biotech values as individual price tags climbed, with two deals above US$ 10bn (against none in 2013), the acquisition of Covidien and the sale of Glaxo Smith Kline’s oncology business. In total, there were ten deals above US$ 10bn (against six in 2013). Pharma also played a pivotal role in cross-border deal flow, amounting to close to a quarter of total inbound (US$ 74.1bn) and 37.4% of outbound (US$ 136.7bn).
Deutsche Bank jumped to fifth place, from tenth, having worked on 47 more deals in 2014 compared to 2013. Perella Weinberg, Centerview and Greenhill all made it into the top 20 ranking by value having been absent from the top 20 for seven, six and four years, respectively.
Record high US M&A worth US$ 1,409.4bn led by transatlantic drive and booming deal count
A surge from Europe toward US targets, record high deal valuations and exit levels, and a deal count nearing 2007’s peak led US M&A activity to reach a record high last year. Total deal value soared 56.6% from US$ 900.1bn in 2013 to US$ 1,409.4bn in 2014, while total deal count rose 21.5% from 3,937 transactions to 4,782.
US firms commanded some of the highest deal valuations globally, with average deal values increasing 30.15% in the past year, reaching a record high of US$ 616.3m in 2014. Premiums paid jumped to 29% in 2014, from 26% in 2013, with an EBITDA multiple of 14.5x.
US private equity exits reached an all-time high in 2014 with 958 deals valued at US$ 262.1bn, up 70.6% by value compared to 2013 (US$ 153.6bn on 735 deals). Along with a general rise in Technology transactions, the past year saw an upswing in exits in the space, reaching the highest deal count and value on record: 292 deals worth US$ 49.6bn, more than double 2013’s value (US$ 24.7bn). In the Pharma, Medical & Biotech sector, the US$ 42.3bn worth of exits in 2014 was 56.1% higher than the previous peak in 2007 (US$ 27.1bn).
Energy, Mining & Utilities M&A more than doubled in value compared to 2013 with 107 more announcements. The US$ 318.1bn-worth of deals came despite only two deals making it into the top ten deals of the year: the re-structuring of Kinder Morgan, valued at US$ 58.8bn, and Halliburton’s US$ 38bn acquisition of Baker Hughes.
Dominated by a burst of Technology activity, the most notable increase by deal count came in the TMT sector (1,022 deals worth US$ 302.2bn). The 787 Technology deals eclipsed every other year by deal count and value at US$ 122.4bn, up 29.3% from 2013 (US$ 94.7bn).
Spurred on by inexpensive natural gas used as a raw material for chemicals, plastics, and packaging as well as for powering manufacturing across all industries, plus a favorable financing market, the Industrials & Chemicals sector saw a revival in 2014 with 826 deals worth US$ 145.9bn, up 85.3% from last year (US$ 78.8bn) and recovering the drop seen from 2012 to 2013. More activity is expected within the auto industry, with asset disposals resulting from increased consumer demand for alternative fuel and safety technologies.
Foreign investors flocked towards US targets with a record number of deals (820) that hit the highest value on record at US$ 373.5bn, surpassing even pre-crisis levels. Most of the rebound was due to interest coming from European buyers which took a 69.5% share of total inbound activity (US$ 259.7bn).
Inbound M&A from Europe more than tripled compared to 2013 (US$ 69.9bn), to US$ 259.7bn in 2014. The US was a prime Industrials & Chemicals target for German buyers with more than double the number of deals compared to 2013, and total values surpassing the previous high of US$ 7.1bn (2006) by a colossal 442.3% at US$ 38.5bn.
Although not quite at the same rate as inbound deals, outbound M&A also saw an increase to the highest value and deal count on record, up 65.9% from 2013 (US$ 174.9bn) at US$ 290.1bn. Tax inversions in the Pharma, Medical & Biotech sector were a strong driver as the number of deals exceeded 100 for the first time and saw a total value of US$
75.4bn eclipse the last peak in 2011 of US$ 35.9bn.
The majority of the US’s top ten deals were inbound, highlighting the attraction to invest in the country through 2014. T. There were 223 more inbound transactions compared to 2013 which led to a 158.5% surge in deal value at US$ 373.5bn, making 2014 the highest value for inbound M&A.
Of the top 10 US deals, two are in the Pharma, Medical & Biotech sector: the US$ 63.2bn Actavis acquisition of Allergan and Actavis’ earlier US$ 23.1bn acquisition of Forest Laboratories. Other top Pharma, Medical & Biotech deals include the US$ 14.2bn Bayer AG acquisition of Merck & Co.’s consumer care business, the US$ 13.4bn Zimmer Holdings acquisition of Biomet, and the US$ 11.9bn Bector, Dickinson and Company acquisition of the CareFusion Corporation.
Goldman Sachs continued its number one streak, advising on four of the top ten US deals of 2014, leading the firm to the top of the league tables in terms of both deal value and count with 261 mandates worth US$ 704.4bn.
The year did not present such big changes for the boutique firms as compared to 2013: Guggenheim Partners fell out of the top 10 in terms of deal value in 2014 from its eight position in 2013, and Lazard maintained its 2013 position as number seven in terms of deal count into 2014. Centerview Partners, on the other hand, entered the top 10 in terms of deal value with the number nine spot this year, advising on 38 deals worth US$ 216.5bn total.
M&A value spiked at US$ 591.6bn with private equity peaking and higher valued inbound deals
With 3,250 deals worth US$ 591.6bn, both the number of transactions and their total value reached the highest level on Mergermarket record in 2014, up 43.4% from 2013’s previous historic high (US$ 412.4bn).
Inbound investment into the region increased for the second consecutive year, making Asia-Pacific targets a steady driver of the overall surge in M&A. As in the previous two years, the bulk of this investment came from European and American buyers, particularly the former, who spent a total of US$ 34.6bn in 2014, up 28.6% on 2013.
The price paid for Asian targets by European bidders increased to US$ 254.7m during 2014, up from US$ 192.4m in 2013. Six deals from Western Europe were above US$ 1bn, with the largest seeing Belgiumbased Anheuser-Busch InBev acquire Oriental Brewery for US$ 6.2bn. A draw to the region from foreign investors could be the EBITDA
valuation at 16.6x, much lower compared to the previous ten years’ average of 18.9x.
Private equity activity was another growth base in 2014, which saw records in buyouts and exits in terms of both value and volume of deals. A record US$ 68.8bn was invested by private equity firms, up 62.4% on 2013. Exits totaled US$ 35.4bn with 185 deals, up 21.1% on 2013’s previous record value (US$ 29.2bn from 138 deals).
The Technology and Media sectors saw a strong level of private equity exit activity during 2014. Technology exits had seen a steady rise but saw a dramatic increase in 2014, up to 33 exits worth US$ 3bn from just seven in 2008. Since Media exits started in 2005, the level of activity has increased with 2014 seeing 10 deals worth US$ 4.5bn from
five deals worth US$ 331m in 2005.
A total of 399 Technology deals amounted to US$ 53.7bn, 46.9% higher than the US$ 36.5bn from 248 deals in 2013, with tinterest from foreign bidders peaking in 2014 (91 deals worth US$ 9.2bn). A huge jump in buyouts in the sector saw 77 deals at US$ 11.7bn, compared to the 38 in 2013 valued at US$ 9.4bn.
The ongoing growth in the region’s Consumer sector saw 324 deals valued at US$ 55.2bn, an increase of 28.1% by value from 2013. The industry saw a record value and deal count of inbound deals with 79 transactions worth US$ 18.7bn.
The 427 outbound deals (US$ 89.6bn) was the highest number on record by deal count. However, a tendency to lean toward smaller investments continued with single digit growth year-on-year for the past two years, running at just above 4%.
During the last three years, there has been a shift in the sectors of outbound targets. Outbound M&A has moved away from the Energy, Mining & Utilities sector – down 64.3% to US$ 24.6bn in 2014 from US$ 68.9bn in 2011 – and towards other sectors including Technology, Leisure and Transportation, all of which have had a dramatic upsurge in 2014 with some of the highest levels on record.
The average price paid for a company based in Asia-Pacific (excl. Japan) reached the second highest level on record at US$ 214m during 2014, versus US$ 190.8m in 2013. There were larger deals announced throughout 2014 which influenced the average price, for example five mega-deals (above US$ 10bn) were announced in the region which accumulated a record level for this deal size bracket at US$ 93.8bn.
South Korean companies were the target in two of the top ten deals which boosted the country’s annual total up to the highest on record at US$ 73.5bn. Furthermore, the value came from the highest ever deal count with 334 transactions, up from 280 in 2013. A strong deal flow is also expected for 2015 particularly in the TMT sector with investment in South Korea’s mobile industry being a good testing ground for future investment in Southeast Asia, and also in the advertising digitalisation where emerging market countries are expected to contribute to 62% of additional ad spend between the years 2013 and 2016, according to research by Publicis.
Goldman Sachs headed the top of financial advisor league table by deal value with 71 deals worth US$ 89bn, up 121.4% from 2013 leading to a jump from fifth position. PwC continued to be the most active by deal count with 114 deals worth US$17.9bn.