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Strategic Acquirers Driving Private Equity Firms Out of the M&A Market

January 26, 2017

Strategic Acquirers Driving Private Equity Firms Out of the M&A Market

Corporate acquirers account for largest share of total M&A value on record, according to PitchBook’s 2016 Annual Global M&A Report


SEATTLE — January 26, 2016 — Corporate M&A value in the U.S. and Europe hit both the highest level and largest share of the market on record in 2016, according to recent analysis conducted by PitchBook. Corporate acquirers spent $1.7 trillion, representing a massive 80% of total M&A deal value. For comparison, corporate acquirers spent $1.6 trillion in 2015 and just $713.1 billion in 2010. This uptick in strategic acquirers’ purchasing power comes as corporate cash reserves reached a 10-year high and stock prices rose to all-time highs. As a result, strategics are winning more deals over their private equity counterparts, especially at the high end of the market.


Deal value reaches all-time high as megadeals dominate the market

Through the end of 2016, the total value of U.S. and European M&A amounted to $2.1 trillion. However, as PitchBook continues to collect data from 2016 transactions, it’s clear that 2016 will record the highest amount of M&A deal activity on record. While deal value continues to rise, deal count contracted: in 2016, 18,344 transactions were completed, representing a 23% year-over-year (YoY) decline in volume.


Megadeals dominated the M&A market in 2016. More than 54% of total M&A value came from megadeals (transactions valued at $5 billion or more), by far the largest proportion PitchBook has ever recorded. For context, megadeals accounted for 45% of M&A value in 2015 and just 33% in 2010. The largest deals of 2016 included AB InBev’s $98 billion acquisition of SABMiller, Charter Communications’ $79 billion acquisition of Time Warner Cable, Dell’s $60 billion buyout of EMC and Royal Dutch Shell’s $54 billion acquisition of BG Group.


Corporate acquirers drive up deal values, equity contributions

With record amounts of cash on their balance sheets, strategic acquirers continue to look for opportunities to grow their market share through long-term strategic plays. With more flexibility and less focus on demonstrating a clear path to profitability, many corporate acquirers are able to move swiftly to get deals done, in turn driving up prices and squeezing PE firms out of the M&A market. To demonstrate this trend, PitchBook analyzed price-to-earnings (P/E) for the S&P 500. At the end of 2016, P/E for the S&P 500 was roughly 26.0, compared to a post-financial crisis low of 13.5 recorded in September 2011. This means, on average, a company in the S&P 500 now has nearly double the purchasing power than it did five years ago.


Meanwhile, equity contributions registered their highest level since 2010, at nearly 50%. The combination of inflated equity prices and nearly $1.5 trillion worth of cash sitting on corporate balance sheets simply allows strategics to easily put up more equity and get deals done faster.


Additional findings in this report include:

  • M&A by sector and size
  • Spotlight on B2C deals
  • Spotlight on IT deals
  • Private equity deals
  • 3Q 2016 league tables


Download the full report here.


About PitchBook

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