Mergermarket, the London-based provider of M&A data and intelligence, has published its 2018 global M&A report, which found that the number of deals struck over the year fell for the first time since 2010 to 19,232, after steadily rising for close to a decade.
However, the transactions that did make it to the signing table reached USD 3.5tn worth of activity, ranking 2018 as the third-largest year on Mergermarket record (since 2001) by value. Average deal size saw its second-highest total value on record with USD 384.8m, just below the USD 400.3m peak reached in 2015.
Elizabeth Lim, Research Editor (Americas) at Mergermarket commented: “With so many market-moving factors fluctuating throughout the year, mergers and acquisitions have understandably had a somewhat ambivalent 2018. Intensifying trade tensions, political instability, and increased regulatory scrutiny took their toll on the number of deals struck over the year, though deal values fuelled by cheap financing, pressure on companies to consolidate and competition from sponsors remained relatively high. Comcast’s eventual USD 51.5bn Sky takeover was a case in point where the Pennsylvania telecoms giant ended up paying considerably more than its starting offer in an effort to beat rival bidder Twenty-First Century Fox.”
Yet, activity did suffer in some corners. Chinese buys of US firms fell 94.6% to USD 3bn from a record USD 55.3bn in 2016. Meanwhile, China’s bids in Europe increased 81.7% to USD 60.4bn from USD 33.2bn last year. Cross-border count fell by 6.6% to 6,405, while valuations inched higher to USD 1.35tn from USD 1.27tn the year prior. Domestic count slipped to 12,827 from 13,115, while value increased 15% to USD 2.18tn from USD 1.90tn. US consolidations accounted for much of this, with top deals in pharmacy benefit management, telecommunications, energy, software, retail, and real estate, many of which found consolidation necessary for survival as technology disrupts sector after sector – a trend that seems likely to continue causing more structural changes in 2019.
In the private equity space, historically low interest rates in the post-crisis period aided much of the capital needed to fund bidding wars. Ahead of expected interest rate rises, global buyout activity reached USD 556.6bm, its highest total in a decade and 3.7% more than 2017’s USD 536.7bn. Buyouts also achieved their highest-ever deal count – 3,599 – breaking the previous record of 3,530 set in 2017.
Three sectors to watch in 2019 based on strong figures in 2018 include Energy, Mining & Utilities (EMU) – which ranked first by hitting its second-highest value on record with USD 673bn; Construction, which reached a new decade high of USD 116.5bn, driven by PE plays and infrastructure bids – the total value was just under 2007’s record of USD 116.8bn; and Defense also set a new record with USD 28.8bn as competition for government contracts heated up, according to Mergermarket data and intelligence.