Is M&A Activity Slowing Down? Not At All, A New Study Shows
M&A activity throughout August remained strong, according to Merrill Datasite's "Monthly M&A Insider" report.
According to Merrill Datasite, M&A activity hasn't been affected by the recent selloff in the global markets. In fact, August proved to be a busy month for M&A deals, with 952 global deals announced – valued at a combined $297.8 billion. This marked a 12.7 percent increase in value compared to the same period a year ago when 1,287 deals were announced at a total value of $264.3 billion.
Global buyouts in August consisted of 102 deals worth $46.9 billion (versus 191 deals worth $24.8 billion in August 2014).
The top sector was industrials and chemicals, with 203 deals worth $76.6 billion, and was highlighted by Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B)'s acquisition of Precision Castparts for $36.5 billion and CF Industries Holdings, Inc. (NYSE: CF) acquisition of OCI NV's European, North American and Global Distribution businesses.
Year-to-date, 7,863 deals have been announced worth $2.5 trillion – marking the highest valued first eight months to start a year since 2007 when there were 10,836 deals worth $2.7 trillion.
North America was the "dominant" region in global M&A with 307 deals worth $177.3 billion. By comparison, August 2014 featured 476 deals worth $166.4 billion. Despite the ongoing weakness in the European economy, the region saw a total of 323 deals worth $51.3 billion in August, marking only a 1.6 percent decrease in value compared to August 2014.
Cross-border M&A activity rose 1.2 percent in August and consisted of 359 deals worth $95.9 billion.
By value, Credit Suisse Group AG (ADR) (NYSE: CS) was the leading financial advisory firm, as it oversaw $104,676 million worth of deals. By volume, Goldman Sachs Group Inc (NYSE: GS) played an advisory role in 27 deals.
United States and Canada combined for a total of 309 deals worth $170.6 billion, of which the former accounted for 287 deals valued at $168.6 billion. This occurred during what is typically considered a slow month and showed that M&A activity continues to grow.
The two economies benefited from a "stable" economic outlook, coupled with companies willing to invest surplus cash (and available financing capabilities) to improve their market position and competitiveness.
"Even though the US stock market has been recently shaken by devalued Chinese currency, it's the fundamental long-term economic factors that play a major role in M&A activity," the report stated.
In August alone, the United States and Canada contributed 13.3 percent to the year-to-date deal value of $1.3 trillion.
Central And South America
Brazil was the main driver behind M&A activity in Central and South America, despite ongoing economic growth concerns in the country. Total M&A in the region consisted of 43 deals, which were valued at $9 billion – of which, 24 deals and $6.6 billion involved Brazilian firms.
Financial services was the busiest sector, highlighted by the acquisition of HSBC's Brazil unit by Banco Bradesco for $5.2 billion. The acquisition marked the largest regional deal within the financial services category in almost seven years and the fourth-largest deal on record dating back to 2001.
Chile "seems to be going strong" with three deals worth $992 million in August, outranking Mexico as the second-leading M&A market during the month. Chile's largest deal consisted of a $300 million acquisition of Anglo American Norte by a foreign, Audley Capital Advisors led consortium.
"While multiple countries in C&S America, including Chile, are working to reform themselves and recover economically, it remains to be seen how busy the end of the year will be for the region in terms of M&A activity," the report concluded. "August brought some positive news, but whether September will be able to sustain the growth is unclear."
Overall, August was a "healthy" month for European M&A activity, as the continent recorded the third highest total deal values post-economic crisis.
European companies participated in 323 M&A deals valued at $51.3 billion. The most active country was Italy, with total deals reaching $14.4 billion. The largest deal consisted of Hutchinson's $11.9 billion acquisition of Wind Wind Telecomunicazioni and 3 Italia SpA.
Inbound deals into Europe decreased 38.8 percent from a year ago, falling to $21.4 billion. Outbound deals announced by European companies rose 83.2 percent to $37.1 billion –marking the busiest August outbound activity. Of note, 77.1 percent ($28.6 billion) of deals executed by European companies were targeting U.S. companies.
Middle East And Africa
The Middle East and Africa region attracted 21 deals worth a combined $2.8 billion in August, marking a "relatively consistent" level from July, while marking a 115.6 percent surge in deal value versus August 2014.
M&A activity from January through August has been weak with a total of $11.8 billion worth of deals, which marked a 43.6 percent decrease from the same period in 2014. However, August saw a reversal of the trend with four energy, mining and utilities deals, the largest of which was the $1.8 billion acquisition of two Angola-based oil and natural gas fields by Cobalt International Energy. As such, Angola was the most targeted country in August, followed by South Africa (four deals, $485 million) and Saudi Arabia (two deals, $227 million).
Of note, South African companies have been "uncharacteristically quiet," with only $68 million worth of deals – marking a noticeable downtown from May, which consisted of $3.9 billion worth of deals.
Asia-Pacific (Excluding Japan)
Asia-Pacific (excluding Japan) saw 255 deals valued at $59.3 billion, marking an increase of 58.9 percent by value with 36 fewer deals compared to August 2014.
Greater China "dominated" the M&A market with 159 deals valued at $42.9 billion. Among the top 12 deals in terms of deal value (US$>1 billion) in the region, 11 were from Greater China, seven from China, two from Hong Kong and two from Taiwan.
The largest deal in the region consisted of Brookfield Infrastructure Partners L.P. (NYSE: BIP)'s $9.45 billion acquisition of Asciano Limited. The deal proved to be the second largest transportation deal targeting Asia since 2000.
Industrials and chemicals saw the largest number of deals (75) and value ($16.4 billion), led by Beijing Shougang Co Ltd's $7.6 billion acquisition of a 51 percent stake in Shougang Jingtang United Iron & Steel Co Lt.
Japan-targeted M&A activity consisted of 22 deals valued at $771 billion. In the same month a year ago, Japanese companies took part in 30 deals worth $759 billion.
Inbound activities rose to $575 million (four deals) with the top four target deals all coming from foreign investors; the most notable deal consisted of a consortium led by Germany-based Freudenberg SE acquiring 55.44 percent stake in Japan Vilene Company via tender offer for $288.9 million.
Outbound deals in August rose to 21 deals ($7.7 billion), a noticeable increase from just $2.7 billion worth of deals a year ago. The largest deal consisted of a $3.8 billion acquisition of Symetra by Sumimoto Life.
Industrials and chemicals was the strongest sector in terms of deals (six) and value ($321 million) and was highlighted by a $289 million acquisition of Japan Vilene Company (55.4 percent stake) by a consortium for Japan Vilene.
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