Global M&A Market Booming as Investors Take Advantage of Healthy Economy and Plentiful Financing Options
August 9, 2018
SEATTLE, Aug. 9, 2018 -- PitchBook, the premier data provider for the private and public equity markets, today released its 2Q 2018 Global M&A Report, which found an uptick in average deal size that drove M&A investment activity in the first half of 2018. Although European M&A got off to a slower start in the first half of the year compared to 2017, dealmaking in the UK was healthy in the mega-deal (over $5 billion) space considering the forecasted negative effects of Brexit. Additionally, M&A within the financial services sector did not see the same boost in activity due to a new breed of competitors and increasingly onerous regulations.
"The M&A market is inexorably linked with business sentiment, corporate fundamentals and macroeconomic forces," said Wylie Fernyhough, analyst at PitchBook. "With all these indicators continuing to trend positively, the global M&A boom shows no signs of stopping and the announced deals should ensure M&A activity continues to flourish throughout the rest of the year."
Macro M&A Activity
North America and Europe saw 4,735 deals completed in Q2 totaling $987.8 billion – down 2% and up 24% respectively compared to $799.7 billion across 4,823 deals reported in 1Q 2018.
31 mega-deals were completed in 1H 2018, boosting overall deal value despite a plateau in deal count. Vodafone's $21.8 billion (€18.4 billion) acquisition of UPC Czech was one of five deals above $10 billion closed in 2Q leading to a rise in average deal value.
A longer-term, subtle shift is underway in global interest rates; with rates rising in North America but pushed off another year in the Euro Zone, companies may be pushing through acquisitions today in order to secure more attractive financing before a rise in interest rates makes a deal uneconomical.
Europe M&A transaction volume and value got off to a slow start in 1H 2018, with 3,424 completed deals totaling $569.7 billion, compared to 5,336 deals valued at $797.8 billion achieved in the same timeframe last year. Dealmaking was healthy as the forecasted negative effects of Brexit have not taken effect with regards to corporate acquisitions.
European activity paled in comparison to North America, though European buyers participated in two of North America's largest transactions in the first half of the year – Bayer's $63 billion acquisition of Monsanto and Sanofi's $11.6 billion acquisition of Bioverativ Therapeutics.
13 mega-deals closed in 2018, five of which were in the UK. This acceleration of mega-deals – also extends to announced deals, such as Takeda's bid for Shire worth $62 billion (£45.3 billion) and the current bidding war between Fox and Comcast for Sky valued at $34 billion (£26 billion) – gave light to the strong UK market which offers a competitive advantage with deep capital markets and talent pools.
The financial services sector also saw a slow start to dealmaking the first half of the year with 790 deals closed totaling $161.5 billion compared to $227.6 billion closed in 1H 2017.
Despite a lack of closed mega-deals in financial services the past three quarters compared to 11 in the three quarters preceding that period, the sector saw a couple of notable transactions in Q2 such as the $3.0 billion (C$3.8 billion) Pure Industrial acquisition by Blackstone and Ivanhoé Cambridge.
Private markets continued maturation and growth has led the asset class to be viewed as an integral part of a diversified portfolio and many institutional investors continue to increase their target allocations –ODDO BHF's $2.1 billion acquisition of PE firm ACG Capital in Q2 is an example of a traditional manager expanding private market offerings.
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