M&A at a Glance: 2015 Year-End Roundup

Ariel J. Deckelbaum is a partner and deputy chair of the Corporate Department at Paul, Weiss, Rifkind, Wharton & Garrison LLP. This post is based on a Paul Weiss client memorandum by Mr. Deckelbaum. The complete publication, including figures, is available here.

Continuing the upward trend started in 2013, 2015 was a record-breaking year for M&A activity. Almost every measure tracked in our Year-End Roundup increased sharply both globally and in the U.S.

Globally, overall deal volume as measured by total deal value was $4,741 billion, which is 63.7% greater than in 2014 ($3,506 billion), and 83% greater than in 2013 ($2,591 billion). In the U.S., overall deal volume was $2,285 billion, which is 56% greater than in 2014 ($1,465 billion), and 133.4% greater than in 2013 ($979 billion). Strategic deal volume in 2015 increased from 2014 by 41.8% globally (from $2,620 billion to $3,715 billion), and by 63.9% in the U.S (from $1,040 billion to $1,705 billion). As a result of this growth, the ratio of strategic to sponsor-related deal volume in the U.S. increased from approximately 2:1 in both 2013 and 2014 to approximately 3:1 in 2015. (Figure 1 of the complete publication, available here). Average deal value in the U.S. was 12.1% higher in 2015 than in 2014. The average value of the ten largest “megadeals” in 2015 was approximately $44 billion, which is consistent with 2014, but more than 160% greater than the average value in 2013. (Figure 2.)

With respect to cross-border activity, inbound U.S. transactions increased in volume by 74.8% as compared to 2014, while outbound U.S. activity increased by 26.2%. (Figure 1.) Canada dominated the field of U.S. crossborder transactions, overtaking Germany’s position in 2014 as the leader in investments in U.S. companies by volume as measured by deal value and besting second place United Kingdom by 126.6%. Canada also retained its 2014 top spot in the number of U.S.-company acquisitions, again besting second place United Kingdom by more than double the number of transactions. (Figure 3.) In outbound U.S. transactions, the United Kingdom continues to hold its long-standing position as leader in terms of deal volume, but was again second to Canada in 2015 in terms of number of deals. (Figure 3.)

In terms of M&A activity by sector, Healthcare retained its lead as the most active U.S. target industry by volume, increasing by 77.6% from 2014. Computers & Electronics maintained its lead in terms of the most active U.S. target industry measured by number of deals. (Figure 4.)

On the U.S. public merger front, there were a few noteworthy observations from 2015, however, the overarching message is one of consistency in the observed terms:

  • Average reverse break fees increased to 5.6% in 2015 from 4.8% in 2014 (although such 2015 figure was consistent with 2014’s 5.7% average reverse break fee figure). Across strategic transactions, reverse break fees increased to 5.1% from 4.3%in 2014, and across sponsor-related transactions reverse break fees increased to 7.4% from 6.5%. Target break fees have remained fairly consistent at approximately 3.5% over the last three years. (Figure 5.)
  • The percentage of all U.S. public cash-only transactions showed a slight increase (from 50.3% in 2014 to 52.9% in 2015), but still falls short of its three-year high of 67.8% in 2013. (Figure 6.)
  • The incidence of tender offers as a percentage of U.S. public mergers remained relatively unchanged (22.2% as compared to 21.7% in 2014), reflecting a fairly consistent level of such transactions since 2013. (Figure 7.)
  • The use of go-shop provisions increased to 11.6% in 2015 from 7.6% in 2014. Notably, the percentage of transactions with go-shops involving strategic buyers increased to 8.4% in 2015 from 4.3% in 2014. (Figure 8.)
  • Finally, the percentage of U.S. public mergers that were hostile or unsolicited decreased slightly to 13.2% in 2015, as compared to 15.7% in 2014. (Figure 9.)

The complete publication, including figures, is available here.

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