Big deals drive global M&A in Q1 2013

May 2013 | FEATURE | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

According to Dealogic’s ‘Global M&A Review: First Quarter 2013’, M&A deal value reached $690.3bn in Q1 2013 – up 18 percent compared with the same period in 2012. The 2013 figure was bolstered considerably by three competing bids for Dell Inc., worth a combined $66bn.

However, despite the high aggregate value, only 8396 deals were completed during Q1 2013, the lowest quarterly figure since 7990 deals were completed in Q3 2005. The 2013 figure also represents a drop of 26 percent on 2012’s 11,370 deals.

Deals valued at less than $1bn totalled $249.9bn in Q1 2013, a 10 percent decline on Q1 2012. Deal activity also dropped 25 percent with 3803 deals completed. Sub-$1bn deals accounted for 36 percent of total M&A volume, down 11 percent from Q1 2012.

Deals worth over $10bn more than trebled in Q1 2013 compared with Q1 2012, with a total value of $212bn compared with $68.5bn the previous year. These $10bn-plus transactions accounted for 31 percent of total M&A, the highest share since Q1 2009. Global average deal sizes also rose in Q1 2013 to $177m, the highest quarterly average since Q2 2007 ($253m).

Cross-border M&A in the quarter was down year on year. $164.7bn worth of deals were reported, a 7 percent decline compared with Q1 2012’s total of $177bn. The 2013 figure also accounted for only 24 percent of total M&A volume, which is the lowest share since the 21 percent recorded in Q4 2009.

The largest deal completed during the first quarter of 2013 was the $64bn spin-off of AbbVie from Abbot Laboratories. The deal accounted for 69 percent of total healthcare M&A and helped the sector lead the global target sector rankings for the quarter with $92.4bn, an increase of 231 percent on the $27.9bn recorded for Q1 2012. Healthcare deal volume was actually down for the period, however, with 519 deals being completed in Q1 2013, compared with 719 in 2012.

Global M&A

US targeted M&A led the way globally, with 2501 deals completed at an aggregate value of $347.2bn. This represented a total value increase of 103 percent and the highest Q1 figure since 2007. However, the number of US-targeted deals completed in Q1 2013 was actually the lowest since 2011. There was also a 19 percent decline year on year when compared with the 3101 deals completed in 2012.

Inbound M&A activity in Q1 2013 was down 47 percent on Q1 2012 and 80 percent on Q4 2012.2013 has seen 271 deals completed worth $16.7bn, compared with $31.4bn and $83.7bn in Q1 and Q4 2012 respectively. Outbound US M&A activity reached its highest quarterly total since Q1 2011, achieving an aggregate value of $61.9bn, double that reached in Q1 2012 at $29.1bn.

The US also outstripped other regions by deal value. The UK was the second most targeted nation, with $48.9bn worth of deals completed, an increase of 32 percent from 2012. China saw the second largest number of deals completed, however, with 670 completed for a value of $37.8bn, a 6 percent increase. European targeted M&A declined to $172.7bn in Q1 2013, the lowest Q1 total since 2009; Latin American targeted M&A also fell 41 percent to $18.2bn via 309 deals. This figure represented the lowest first quarter for the region since 2005.

Financial sponsors

Financial sponsor-backed deals played a significant role in both global and US targeted M&A. In the US, 31 percent of deals were driven by financial sponsors, up from 20 percent in Q1 2012. The two financial sponsor-supported Dell offers helped spearhead this rise. The first bid on 5 February by Silver Lake Management was valued at $20.7bn, followed by the $25.7bn bid by The Blackstone Group announced on 25 March. These two competing Dell bids accounted for 46 percent of global financial sponsor announced deals in Q1 2013. The technology sector, on the back of the Dell bids, was the most targeted for financial sponsor-backed deals, with 77 deals worth $47.8bn.

The food and beverage industry was the second most popular sector for financial sponsor deals, driven primarily by the Berkshire Hathaway and 3G Capital buyout of HJ Heinz Co for $27.5bn in February. The retail sector was the third most-popular industry for financial sponsor M&A, with 33 deals worth $6.1bn – a 67 percent increase on Q4 2012 and the highest first quarter since 2007.

Global financial sponsor entry value reached $101.4bn in Q1 2013, trebling the 2012 figure of $33.8bn and reaching the highest quarterly value since Q3 2007. With just 373 deals completed, Q1 2013 saw the lowest number of deals since the 344 deals completed in Q1 2009. The 2013 figure is down considerably from the 500 deals completed in Q1 2012. The EMEA region also saw the largest decline in activity, globally, with 105 fewer deals than in Q1 2012.

Richard Summerfield