Global M&A H1 2016 Roundup With League Tables Of Financial Advisors by MergerMarket

A few key findings include:

  • An uncertain environment in 2016 caused by the UK’s referendum on European Union (EU) membership and US elections are political upheavals that have negatively impacted M&A activity, setting global M&A back 26.6% during H1 2016 with deals worth US$ 1.32tn compared to US$ 1.81tn in H1 2015, and down 66.8% versus US$ 3.98tn in H2 2015
  • The build-up and announcement of Brexit sent shockwaves through the dealmaking community. The UK’s second quarter featured the country’s referendum and resulted in its Q2 value (US$ 19.3bn) crashing 50.5% from Q1 2016 (US$ 38.9bn). Firms postponed deals, cautious of the impact exchange rates and questioning what they will actually be buying into, unaware of how future negotiations will affect them. Foreign acquirers are delaying transactions, with the value of inbound deals plummeting more than half (-60.1%) from Q1 2016 (US$ 32.8bn) into Q2 2016 (US$ 13.1bn). Private equity firms are holding back from casting any confidence in the long-term UK environment – buyouts of UK companies amounted to only US$ 4.9bn, three quarters less (75.4%) than H1 2015
  • US dealmaking rounded out the first half of 2016 with a rebalancing act following 2015’s record-breaking values. M&A activity totaled US$ 562.7bn across 2,242 transactions, a 31.5% drop in value and decrease in volume by 342 transactions from H1 2015 (US$ 822bn, 2,582 deals). At the same time, overall value remained 6.1% above Mergermarket’s historic average H1 total deal value (US$ 530.2bn)

Regional M&A comparison

Global M&A

Global M&A

  • An uncertain environment in 2016 caused by the UK’s referendum on European Union (EU) membership and US elections are political upheavals that have negatively impacted M&A activity, setting global M&A back 26.6% during H1 2016 with deals worth US$ 1.32tn compared to US$ 1.81tn in H1 2015, and down 66.8% versus US$ 3.98tn in H2 2015.
  • The build-up and announcement of Brexit sent shockwaves through the dealmaking community. The UK’s second quarter featured the country’s referendum and resulted in its Q2 value (US$ 19.3bn) crashing 50.5% from Q1 2016 (US$ 38.9bn). Firms postponed deals, cautious of the impact exchange rates and questioning what they will actually be buying into, unaware of how future negotiations will affect them. Foreign acquirers are delaying transactions, with the value of inbound deals plummeting more than half (-60.1%) from Q1 2016 (US$ 32.8bn) into Q2 2016 (US$ 13.1bn). Private equity firms are holding back from casting any confidence in the long-term UK environment – buyouts of UK companies amounted to only US$ 4.9bn, three quarters less (75.4%) than H1 2015.
  • China’s spending spree adding pressure to US and European bidders in auction processes is set to increase – the Chinese government selects which company it wants to bid for a non-Asian firm, but it will relax these regulations and allow multiple bidders if the foreign company is worth more than US$ 2bn. China has made four of its largest outbound acquisitions on Mergermarket record in 2016, buying quality over quantity – Chem China/Syngnenta (US$ 45.9bn), Tencent Holdings/Supercell Oy (84.3% for US$ 8.6bn), Anbang Insurance Group/Strategic Hotels & Resort (US$ 6.5bn) and Tianjin Tianhai Investment/Ingam Micro (US$ 6.1bn). The country has already broken all annual totals for European (US$ 75.4bn) and US (US$ 32.9bn) acquisitions, up 156.6% and 179.4%, respectively from 2015.
  • German M&A rebounded as a buyer and a seller during H1 2016 after a dip in 2015. As a target, Germany attracted US$ 30.3bnworth of deals, with Industrials & Chemicals M&A (US$ 17.6bn in H1 2016, up 252.9% from H1 2015) and Chinese buyers (US$ 8.6bn) accounting for a 28.4% share, being the key drivers. The country also emerged as a keen buyer with outbound deals worth US$ 51.4bn being 90.7% above the whole of 2015 (US$ 27bn).

Global M&A

Global M&A

European M&A

  • European deal-makers have battled political headwinds during the first half of 2016. Uncertainty surrounding the UK’s EU referendum, as well as the US government’s clampdown on tax inversion deals have both served to slow M&A activity within the continent. As a consequence, 3,110 deals worth US$ 342.8bn marked both the lowest H1 deal value and count since 2013 (2,784 deals, US$ 335.1bn). Sellers have been forced to accept that their assets are worth less than they were a year ago, with average EBITDA multiple for acquisitions dropping to 12.3x, down from 15.0x in H1 2015.
  • The run up to Brexit spooked deal-makers targeting the UK during the first half of the year. Following a record 2015, UK M&A activity during H1 recorded 638 deals worth US$ 58.2bn, its lowest deal value since 2010 (US$ 56.3bn, 504 deals). A drop in activity was seen in Q2 as the EU referendum drew closer, with US$ 19.3bn-worth of deals representing the lowest Q2 value since 2009. A decrease in valuations highlight this uncertainty, with the average EBITDA multiple for transactions dropping to 13.4x, down from 17.8x in H1 2015.
  • German deal-makers are investing larger sums in US assets. During H1 2016, there were 22 deals worth US$ 12.3bn by German companies acquiring US targets, up 70.8% by value compared to the whole of 2015 (50 deals, US$ 7.2bn). Bayer’s ongoing US$ 62bn pursuit of US-based Monsanto is further evidence of this trend, and if announced in Q3, will become the largest outbound acquisition by a German company on Mergermarket record.
  • High quality German assets were sought after during the first half of the year, particularly by Chinese buyers. During H1 2016, Chinese deal-makers partook in 16 deals worth US$ 8.6bn, up from just 12 deals worth US$ 393m for the whole of 2015, and overtaking all annual deal values on record. Dealmakers have been motivated by the need to pick up Western industrial technologies, as seen in Midea Group’s US$ 4.3bn acquisition of robotics maker KUKA, and China National Chemical Corporation’s US$ 1bn purchase of industrial machinery manufacturer KraussMaffei Technologies.

Global M&A

Global M&A

U.S. M&A

  • US dealmaking rounded out the first half of 2016 with a rebalancing act following 2015’s record-breaking values. M&A activity totaled US$ 562.7bn across 2,242 transactions, a 31.5% drop in value and decrease in volume by 342 transactions from H1 2015 (US$ 822bn, 2,582 deals). At the same time, overall value remained 6.1% above Mergermarket’s historic average H1 total deal value (US$ 530.2bn).
  • With so much uncertainty post-“Brexit”, it is unclear exactly what kind of impact the referendum’s results will have on transatlantic M&A in the coming months. According to Mergermarket intelligence, some Mid-Atlantic deal-makers believe that short-term turmoil will give way to resuming strong activity. Companies sitting on cash and signals from the Fed that interest rates will likely not rise for the time being, partially due to the referendum, have buyers ready to seize attractive targets once the dust settles.
  • However, data leading up to the vote indicates that business may not continue as usual, and that the turmoil could last longer
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