Global M&A activity hits record high

June 2018 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

June 2018 Issue

2017 was a bumper year for global dealmaking and 2018 has maintained the momentum, according to Mergermarket’s ‘Q1 2018 Global M&A Report’.

The first quarter of 2018 saw global activity reach a 17-year high, with 3774 announced deals, totalling $890.7bn. This represents the strongest start to the year since 2001, when Mergermarket began recording the data, and an 18 percent year-on-year increase in value compared to the first quarter of 2017.

“The extraordinary surge in dealmaking seen at the end of 2017 has carried through into 2018 as global M&A hit its highest Q1 value on Mergermarket record as pressure from investors and the search for innovation continue to push corporates towards M&A”, said Jonathan Klonowski, research editor at Mergermarket.

The US accounted for 30.4 percent of global deal count, down 0.7 percent on 2017, however deal value for the region was up 26.1 percent to $393.9bn. Geopolitical challenges, such as the imposition of trade tariffs by the US in Q1, helped unsettle the dealmaking environment. Fears of a trade war, on the back of steel and aluminium tariffs, have ‘spooked’ dealmakers, according to the report. Total deal activity in the US fell by 305 to 1148.

Consolidation in the tech industry was notable. US tech mergers reached a record total of $47.6bn from 226 deals, making it the top sector by deal count. However, the top sector in terms of deal value was business services, with $116.9bn, 58.1 percent of which was generated by Cigna’s $67.9bn bid for Express Scripts.

The pharma, medical and biotech sector saw a 15.7 percent decline in Q1 value to $28bn and a fall in deal count to 108 transactions compared to Q1 2017. The financial services sector also saw a dramatic decline in the value of transactions, down 33.5 percent to $14.9bn across 97 deals.

Inbound M&A into the US fell 54.1 percent year-on-year to $63.1bn from $137.5bn. This considerable decline can be seen as a response to increasingly protectionist policies being pursued by the Trump administration. A number of Chinese inbound acquisitions have been blocked on protectionist and national security grounds. Chinese inbound M&A fell 42.9 percent by value to $1.1bn from Q1 2017. Outbound European M&A into the US reached $31.5bn.

Megadeals were a notable feature of the first quarter, with 14 deals exceeding $10bn announced, six of which were in the US and six targeting Europe. The largest US-based announced deal was the Express Scripts /Cigna transaction.

European M&A enjoyed a strong start to 2018. European-focused deals reached $256.4bn in Q1, the highest in a decade, and only the third time since Mergermarket began reporting that Europe has surpassed the $250bn mark by March. Fifty-eight percent – $148.7bn – of all European deal value was generated in March. E.ON’s $46.6bn acquisition of German energy firm innogy accounted for just under a fifth of Europe’s value this year to date.

The UK and Germany were Europe’s most targeted countries by both value and deal count, exceeding $50bn. The UK saw 266 deals worth $59.3bn, its highest quarterly value since Q4 2016, and accounted for 23.1 percent of all European M&A so far. German M&A jumped to $54.1bn across 180 deals on the back of the innogy deal.

Intra-European M&A climbed to $198.3bn, its third highest level since Q4 2015. M&A into the region from the Middle East reached $3.2bn.

Latin American M&A jumped 86.1 percent in value over Q1 2017 to $26.3bn. Deal count fell by 28 to 126, however – the lowest number of deals for a first quarter since 2010. The region’s share of total global deal value was up 1.1 basis points compared to Q1 2017.

Richard Summerfield