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M&A Activity Dips in May, While Shareholder Activism Trends Toward Settlements

May was mixed bag in the corporate deal book. While private equity activity increased, mergers and acquisitions dipped.

According to data from FactSet, U.S. M&A activity decreased by 6.3% in May. While 964 announcements were made in April, 903 were made in May. However, M&A spending increased significantly, jumping 100.1%.

M&A Activity

M&A activity: Tech Leads the Way in Announcements, Finance in Amounts

Tech has seen the greatest amount of M&A activity in the past three months. Announcements jumped to 526 from 477 year-over-year.

The laundry list of tech M&A newsmakers is long. Avago Technologies revealed plans to acquire fellow chip maker Broadcom in a $37 billion deal in May, just a few months after NXP Semiconductors and Freescale Semiconductor announced a $40 billion merger. And just weeks ago, Intel agreed to buy Altera in a $17 billion deal.

Some of the biggest brands in tech have been high on M&A activity as well. IBM has picked up Blue Box Group, Phytel and Explorys in 2015, and Facebook has acquired TheFind and – through virtual reality company Oculus – Surreal Vision.

Other sectors that have experienced a surge in M&A activity over the past three months compared to the same period in 2014 are distribution services, finance, health services and communications.

Of course, not all industries are in the up-and-up in business deals. FactSet identified five sectors that have experienced a notable decline in M&A activity year-over-year: commercial services, consumer services, producer manufacturing, consumer non-durables and industrial services.

M&A Activity

In terms of value, however, the story is different. Finance led the way in deal amounts over the past three months, followed by electronic technology and process industries.

M&A Activity

Charter – Time Warner Cable Boast Biggest Deal

After 14 months of haggling, Comcast dropped its $45 billion takeover bid for Time Warner Cable in April. Competitor Charter Communications didn’t waste time in stepping in, and on May 26, it made an even bigger offer for TWC. The deal, which values Time Warner Cable at $78.7 billion, is among the biggest of 2015, and, according to FactSet, it is the largest announced in the past three months.

Another sizable announcement worth noting is Monsanto’s proposal to acquire Syngenta for $44 billion, though the latter has spurned the former’s advances.

FactSet also points to Avago’s bid for Broadcom, Williams Companies’ $13.8 billion agreement to acquire the remaining stake of Williams Partners LP, and Danaher Corporation’s maneuver to buy Pall Corporation for $13.6 billion.

Private Equity

The private equity sector saw two more deals in May than it did in April, announcing 93 compared to 91. However, aggregate base equity fell by more than half, to $9.5 billion in May to $20.4 billion in April.

The biggest buyers of the month: Canadians. Firms from the country announced 30 deals in May, followed by 19 deals made by U.K. companies. Japan, China and Germany were also in the mix.

U.K. firms were the biggest sellers, followed by Canada, the Netherlands and Germany.

M&A Activity

Activist Success Continues

In May, DuPont came out victorious in a months-long proxy battle against activist investor Nelson Peltz. The U.S. chemical conglomerate successfully resisted a challenge from the Trian Fund Management head, who sought four board seats and intended to pursue a company breakup.

Peltz’s loss, however, doesn’t mean a complete turn in the tide on activism. According to FactSet, the story is a bit more complicated.

On the surface, it appears that companies are winning more shareholder votes. In fact, company win rate for board seat proxy contests that went to shareholder vote so far this year is about 62% – well above last year’s 39% rate. Moreover, support for activist candidatese is on the decline, with most receiving support from just one third of outstanding votes.

However, it would also appear that fewer proxy battles are actually going to vote. Settlements – instances where companies and activist shareholders make an agreement or enter into discussions in order to avoid a vote – are on the rise.

Thirty-three proxy fights have been formally settled or withdrawn after the company made material concessions this year. What’s more, some companies have chosen to grant activists board seats before allowing the fight to escalate – there have been 46 such cases this year.

M&A Activity