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,