Global and regional Mergers & Acquisitions: Q1 2016 – Including League Tables Of Financial Advisors by MergerMarket
Regional Mergers & Acquisitions Comparison
Global Mergers & Acquisitions
- After a record year for M&A in 2015, 16.2% higher than 2007’s previous peak, there has been a cooling down period at the start of 2016. Global mergers & acquisitions are re-balancing towards a sustainable level with Q1 2016 amounting to US$ 597.4bn. Following a significant drop from the previous three quarters that all posted more than US$ 1tn, it was the lowest first-quarter value in two years, down 24% from Q1 2015.
- China has scaled up its search for foreign targets with its outbound activity accounting for a 26.3% share of total cross-border deals during Q1 2016, a steep increase considering no full year has ever surpassed 7.6%. China’s outbound mergers & acquisitions amounted to US$ 81.7bn in the first quarter, already a record annual total. The country attempted its largest US outbound acquisition in history when Anbang Insurance offered to buy Starwood Hotels and Resorts for US$ 6.5bn. In another deal, China National Corporation made the largest deal of Q1 when it acquired Switzerland-based Syngenta for US$ 45.9bn. And in yet another transaction, Tianjin Tianhai Investment bought US-based Ingram Micro for US$ 6.1bn.
- The mega-deal frenzy that started in 2014 is winding down as companies look towards less sizeable deals. During Q1 2016, there were eight mega-deals (>US$10bn) valued at US$ 158.5bn, down from 13 worth US$ 259.4bn in Q1 2015, but still the second highest Q1 value since 2009 (seven worth US$ 209.8bn). The average deal size for global transactions in the first three months reached US$ 367m, down from the highest average deal size for any year during 2015 (US$ 463.3bn).
- A substantial difference this year is the decreasing mergers & acquisitions value in the US (US$ 241.2bn) and Asia-Pacific (US$ 132.0bn), both down more than 30% after both areas saw a record breaking tally during 2015. Meanwhile in Europe (US$ 174.6bn), the region has attracted a lot of Chinese interest this year which is keeping activity on par with 2015 with just a 2.6% decrease compared to Q1 2015.
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European Mergers & Acquisitions
- European mergers & acquisitions has slowed following a post-crisis high reached in 2015, with Q4 2015 posting the second highest quarterly value on Mergermarket record (1,673 deals, US$ 468.4bn). Although Q1 2016 was unable to keep up this momentum, 1,303 announced deals worth US$ 174.6bn represent a mere 2.6% decrease by value compared to Q1 2015 (1,576 deals, US$ 179.2bn).
- In a bid to expand its geographical footprint and against a backdrop of a slowing economic growth, China has driven European targeted mergers & acquisitions activity this quarter. Q1 2016 saw China’s largest outbound acquisition on record – ChemChina’s US$ 45.9bn bid for Swiss agrochemicals manufacturer Syngenta. As a result, Q1 deal value targeting the Industrials & Chemicals sector (US$ 48.3bn) overtook 2015’s total (US$ 10.5bn) by 361.4%.
- UK Inbound mergers & acquisitions may potentially suffer due to the impending referendum determining whether the UK will remain in the EU. As a result, there is a lack of confidence among foreign investors looking at the UK. Concerns voiced surrounding a potential “Brexit” include the relocation of local business, sterling volatility and a loss of vital EU trade links. Following a record 2015 for UK inbound activity by deal count, 121 deals worth US$ 33.0bn were announced in Q1 2016 representing a 38.5% drop by value compared to Q1 2015 (162 deals, US$ 53.6bn).
- In contrast to the large cross-border deals seen in 2015, domestic European tie-ups have fuelled activity within the Pharma, Medical and Biotech (PMB) sector during Q1, as companies seek to cut costs and forge synergies in a competitive market. Of the 82 deals worth US$ 15.5bn targeting the region’s PMB sector, US$ 12.4bn (80.3%) involved a European bidder, up from 30.7% in 2015 and its highest annual share since 2012 (81%).
U.S. Mergers & Acquisitions
- Following a record year for mergers & acquisitions in 2015, deal activity in the US showed signs of cooling in the first quarter of the year. The country recorded 1,007 deals worth a total of US$ 241.5bn, down 33% compared to Q1 2015’s 1,250 deals worth US$ 361.3bn, and down 54.6% compared to Q4 2015’s 1,281 worth US$ 532.9bn.
- US outbound activity has been fast approached by China this year and its increasing level of foreign acquisitions despite the latter’s slowing economy. While the US has seen its total outbound value fall by 5.7% from Q1 2015, China’s outbound value has grown significantly in the same period by 348.8%. So far this year, China leads the US 73.1% by outbound value with 85 transactions worth US$ 82.1bn, versus the US’s 241 transactions worth US$ 47.5bn. Such a percentage could very well continue to increase as China strides toward larger transactions.
- Tax inversion targets, traditionally coming from the Pharma, Medical & Biotech sector, now appear to be shifting toward other sectors such as Industrials & Chemicals, in a bid to scale up to +$100bn conglomerates. US-based Johnson Control’s US$ 16.2bn bid for Ireland-based Tyco International was the top deal for that sector, and one which also looks set to benefit from Europe’s more favorable corporate tax rates as compared to those of the US. The Tyco/Johnson Controls transaction comprises 73.8% of Q1 total outbound value into targets in the Industrials & Chemicals sector (US$ 21.9bn).
- Private equity buyout activity struggled to compete against strategic buyers in 2015, demonstrated by the average price paid last year being just US$ 640.2m compared to a strategic company spending on average US$ 902.8m. However, to date in 2016, the average offer price by a buyout firm has increased slightly to US$ 626.3m, while the average value by strategics has decreased to US$ 607.5m. The following months could provide even more opportunities for buyout firms to secure targets.
Central & South American Mergers & Acquisitions
- Central and South America continued its downturn in mergers & acquisitions activity in the first quarter, following a particularly dismal 2015 when regional values plummeted to their lowest in a decade. Q1 2016 saw 99 transactions, the lowest volume since Q3 2009, worth a total of US$ 10.1bn, the lowest value since Q4 2005. Compared to Q4 2015, value fell 42.9% from 163 transactions worth US$ 17.6bn, and by 10.9% compared to Q1 2015’s 128 transactions worth US$ 11.3bn.
- Q1 saw a shift away from traditional heavyweight economies such as Brazil and Mexico toward Colombia, the region’s top country for mergers & acquisitions for the first time since Q3 2005. Given low activity overall, Colombia’s reign is largely due to a single deal in the energy sector, Canada-based Brookfield Renewable Energy Partners’ US$ 4.7bn acquisition of a 57.6% stake in Isagen, which comprised 46.4% of the region’s value. Brazil, in recent years riddled with corruption scandals, high unemployment and inflation, captured a 25.9% market share with 46 transactions worth US$ 2.6bn, on par with Q1 2015’s 68 transactions also worth US$ 2.6bn. Mexico’s activity fell to its lowest value since Q3 2010, dropping 91.9% from Q1 2015 to 12 deals worth US$ 547m.
- Inbound deals comprised 80.9% of regional mergers & acquisitions with 53 transactions worth US$8.2bn, the highest market share from foreign bidders since Q1 2004. Notably, Canada was responsible for most of the activity, having already surpassed all annual totals on record (since 2001) coming from that country at US$ 4.7bn. Canada was the bidder in four of the region’s nine energy transactions, the lowest volume for energy deals in the region since Q3 2005, which altogether were worth US$ 5.8bn, helping to boost Energy, Mining & Utilities (EMU) to top sector.
- Inbound activity into EMU rose 316.3% by deal value to six transactions worth US$ 5.2bn from Q4 2015, over ten times higher than Q1 2015’s four transactions worth US$ 432m. With staggeringly low oil prices still rocking the energy sector, foreign bidders appear to be showing an interest in Central and South America’s EMU targets, though with such few deals in the region, one large transaction such as the Brookfield/Isagen deal can make a relatively large impact.
See full report below.