Regional M&A Comparison
Carlson Capital's Double Black Diamond Fund posted a return of 3.3% net of fees in August, according to a copy of the fund's letter, which ValueWalk has been able to review. Q3 2021 hedge fund letters, conferences and more Following this performance, for the year to the end of August, the fund has produced a Read More
- As firms attempt to adapt to ever-changing political and technological change, global M&A has stuttered over the summer, following a strong showing in the first half of the year. The third quarter of 2017 has seen just US$ 674bn, the lowest quarterly value since Q1 2016 when 4,349 deals worth US$ 623.4bn occurred. While last year’s deal count was the highest on Mergermarket record (since 2001), the number of deals this year has faltered with last quarter seeing just 3,772 deals, the first time deal count has dropped below 4,000 since Q3 2013 (3,717 deals). The low deal count combined with stable value has pushed the global average deal value to US$ 356m, 5.8% higher than the YTD 2016 figure of US$ 336m and the second highest average value since 2007.
- Energy, Mining & Utilities (EMU), with US$ 131.8bn, was one of two sectors in Q3 to reach the US$ 100bn mark following three of the top 10 global deals being announced in the sector. Mid-August saw a flurry of activity, with three deals totalling US$ 43.3bn within the space of a week, spanning from the North Sea to California. This included the second and fourth largest deals of the quarter, with the Energy Future Holdings’ US$ 18.8bn acquisition of Sempra Energy and the US$ 17bn takeover of Calpine by a consortium led by Energy Capital Partners. The third deal saw Total acquire Maersk’s oil and gas exploration arm for US$ 7.5bn. Technoloy Media & Telecommunications (TMT), following a value of US$ 125.8bn, was the other sector to reach the US$ 100bn figure, which can largely be attributed to an increase in Media M&A in Q3. The value seen in Media in Q3 (US$ 30.5bn) surpassed the H1 value (US$ 28.5bn) as a result of Discovery Communications’ US$ 14.4bn acquisition of Scripps Network Interactive – the largest TMT deal of 2017 so far.
- With five of the ten largest deals seen in Q3 targeting the US, the last three months have seen more of a shift away from Europe and greater investment on the other side of the Atlantic. The largest deal of the quarter saw the tie-up of aerospace firms United Technologies and Rockwell Collins for US$ 29.9bn. This became the second largest deal targeting the US in 2017, only behind the mammoth US$ 60.6bn BAT/Reynolds announcement in January, and forms the largest US domestic deal so far this year. Deals between American firms in Q3 have reached US$ 236.8bn across 900 deals and included all five of the previously discussed deals. This accounted for 83.5% by value of US dealmaking in the last three months. Meanwhile, Europe has faltered in Q3 with its lowest quarterly value since Q4 2012 at US$ 158bn (1,428 deals). This left Europe with a 29.8% share of the global M&A value – the lowest quarterly share of 2017 so far and just under seven percentage points lower than Q2 (36.6%) following US$ 287.4bn announced.
- Following astronomical figures in 2016, Chinese investment into Europe and the US has stumbled so far this year. Increased regulation in China, Europe and the US, have left sellers wary of pursuing Chinese bidders due to concerns over whether deals will be able to close – despite higher premiums often being available. Just 29 acquisitions worth a total US$ 15bn by Chinese firms into the two regions were announced in Q3 – the lowest quarterly deal count since Q1 2015 (23 deals, US$ 11.9bn). While Chinese interest clearly remains strong, as seen with the US$ 9.1bn investment into Rosneft by CEFC China Energy announced in September, this year has also seen a high amount of deals lapsing due to regulatory concerns. In mid-September, President Trump decided to block the US$ 1.2bn bid for Lattice Semiconductor Corporation leading to speculation of other deals meeting the same fate.
Global League tables
- Despite a slow Q3, YTD European M&A remained 20.2% ahead of the same period in 2016 by value – largely as a result of the strong first six months of the year. Last quarter, the region saw 1,428 deals worth a total US$ 162.2bn - the lowest quarterly value since Q1 2013 when US$ 136.3bn changed hands across 1,344 deals. The third quarter saw a distinct lack of megadeals (> US$ 10bn) with just two announced in Q3, with the takeover of UK-based Worldpay (US$ 12bn) and Fortum’s US$ 11.5bn acquisition of Uniper and compares to nine across the whole of H1. The region received eight deals worth over US$ 5bn, including September’s US$ 9.1bn investment into Rosneft Oil Company by CEFC China Energy Company Limited, from Glencore and Qatar Investment Authority.
- The largest deal targeting Europe in Q3 saw the US$ 12bn takeover of UK-based payment services firm Worldpay by US rival Vantiv. The Worldpay deal is the latest in a long line of post-Brexit inbound deals in the UK, following the sharp drop in the value of sterling in the wake of the EU referendum in June 2016. Subsequently, total UK inbound activity in 2017 has reached US$ 98.5bn across 484 deals, the highest YTD deal count on Mergermarket record (since 2001), eclipsing 2015’s 481 deals (US$ 191.5bn). Despite political uncertainty following June’s snap election, the country has seen its second highest YTD value since the crash and a 16.3% rise compared to YTD 2016 (US$ US$ 84.7bn) with 14 more deals. Overall UK M&A represented a 21.4% share of European dealmaking by value in 2017, following US$ 141.1bn across 1,049 deals so far this year. This accounted for a 34.8% increase compared to YTD 2016’s value of US$ 104.7bn (1,094 deals).
- The Business Services sector has seen a strong third quarter, following 226 deals worth a total US$ 35.9bn – a larger value than the Q1 and Q2 values combined (540 deals, US$ 27bn). This increase is largely due to the aforementioned tieup between Vantiv and Worldpay, which represented 33.4% of the quarter’s value and surpassed Blackstone’s US$ 4.3bn takeover of Aon’s benefits outsourcing division in February as the previous largest Business Services deal of 2017. Overall, the sector has experienced an 87.4% growth by value in YTD 2017 in comparison to the same period in 2016, when 885 deals took place worth US$ 33.6bn. So far this year, the sector has seen US$ 63bn across 766 deals the highest YTD figure on Mergermarket record, eclipsing 2014’s previous record of US$ 41.5bn (648 deals).
- European buyouts have seen a dramatic increase in terms of aggregate value in 2017, reaching their highest YTD point since 2008 (US$ 123bn, 983 deals). With a wealth of funds available, private equity firms have conducted 976 buyouts of European firms so far this year, worth a total US$ 112.6bn. This represented a 66.1% increase by value following 24 buyouts worth over US$ 1bn – seven more than in the same period of 2016. The third quarter saw a continuation of big-ticket buyouts seen in H1, with the announcements of the US$5.9bn investment into Stada by Bain and Cinven, Blackstone and CVC’s US$ 4.2bn takeover of Paysafe, and Leonard Green & Partners’ US$ 3.1bn acquisition of CPA Global. Meanwhile, the region saw eight exits above the US$ 1bn mark, with two investments above US$ 5bn. This included Sarvana’s US$ 7.3bn takeover of Germany-based ista International from CVC and CPPIB, announced in late July.
Europe League tables
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