As 2017 draws to a close, we look back at 5 trends that have defined M&A activity over the last 12 months.
Rapid consumer change gives way to buy and build M&A in the sector.
M&A in the Consumer sector has hit its second highest value since the financial crisis as a result of changing technology and consumer habits. The industry has seen a 65.7% increase by value compared to 2016. Indicative of this was Amazon’s $13.7bn spend on Whole Foods in August which was another example where it became quicker, easier and eventually more cost-effective to buy than build when jumping over such high barriers of entry.
Jonathan Klonowski, Research Editor (EMEA) at Mergermarket: “The way in which people consume products and services is changing at a rapid pace due to the latest developments in technology and consumer M&A has seen a clear resurgence this year following a lacklustre 2016.”
Chinese Outbound M&A
Chinese bids for European & US targets fall off a cliff.
China’s aggressive pursuit of American and European targets hit the buffers in 2017, following increased regulations in China, Europe and the US. Deal value fell from 2016’s record figure of $149.7bn across 228 deals to just $52.5bn across 170 deals seen during 2017 as a result of protectionist regulations from the Chinese government, European Union and President Trump’s administration.
Elizabeth Lim, Research Editor (Americas) at Mergermarket: “Chinese buyers, disinclined to be labelled national security risks, have begun pulling back in the US and Europe following record outbound M&A activity in 2016 and blocks by regulatory bodies such as CFIUS this past year. However, the fact remains that Chinese capital is still seeking targets; the question now is where those might next be.”
Eurozone recovery leads to an uptick, as Brexit encourages British corporates to seek consolidation.
Europe has seen a boost in dealmaking in 2017, with the continent accounting for 28.9% of global activity year-to-date – its highest contribution since 2013. Much of this can be attributed to stronger economic figures across the Eurozone, which have resulted in a surge in M&A in the bloc in 2017. Meanwhile, as has been the case for the past 18 months, uncertainty surrounding Brexit has again been instrumental behind UK M&A. A weaker sterling has continued to push bargain hunters the UK’s way; while British corporates have sought domestic targets in an attempt to bat off cherry-picking predators in the form of Standard Life’s £1.8bn takeover of Aberdeen Asset Management and Tesco buying Booker.
Kathleen Van Aerden, Head of Research EMEA at Mergermarket: “Greater confidence in the market as a result of stronger GDP and unemployment figures across the bloc have been key to the increase in Eurozone M&A.”
Megadeals by Month
December storms ahead, but a volatile 11 months has left 2017 playing catch-up.
December has seen a clear uptick in megadeals, with two of the largest deals of the year occurring this month including Fox and Disney’s announcement that they will embark on a $66bn tie-up not only added to the end-of-year flourish in December, but is also a fitting example of much that has driven 2017 M&A activity. The deal pushed this year’s lagging global M&A figures to $2.99tn across 17,455 deals, yet still appears set to fall short of last year’s full year $3.26tn secured over 18,592 deals.
Giovanni Amodeo, Global Head of Research at Acuris: “December may be delivering, but a volatile previous 11 months has left 2017 forever playing catch-up.”
Cross Border M&A
Cross-border M&A reaches new heights as dealmakers spread risk through consolidation.
Cross-border activity has once again been a key component of M&A in 2017, despite seeing a clear reduction in the number and value of such deals. In 2017, there were 6,136 cross-border deals worth US$ 1.27tn, a 4.7% drop compared to 2016 (US$ 1.33tn). However, while cross-border M&A has reduced in terms of raw numbers, its share as a percentage of global M&A in 2017 stood at 42.6% by value, the highest since 2014 and 35.2% by deal count, the highest such figure since 2011. As confidence wanes in various regions it appears that dealmakers are pursuing a strategy of spreading risk, over consolidating within home markets.
Sola Akinola, Global Head of Deals & Data Content at Mergermarket: “Unfazed by geopolitical headwinds in the form of protectionist rhetoric and policies, companies continue to seek access to new markets and customers in an increasingly global economy. It will be interesting to watch how cross border activity shapes up in 2018, given that such events tend to have a delayed impact on M&A activity”
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