Global law firm White & Case LLP and Mergermarket, today released a new report, Record Breaker: US M&A in 2015, which reveals that the US market delivered nearly US$2 trillion worth of deals in 2015—a total not seen since the pre-crisis days of 2006. The entire report can be viewed by clicking here.
"2015 stands apart because a number of trends converged to bolster confidence and inspire risk taking among deal makers," said John Reiss, Global Head of White & Case's Mergers & Acquisitions Practice. "The economy continued steady expansion for the sixth consecutive year, while unemployment levels continued to fall. Most buyers could obtain favorable financing, and corporates and private equity firms amassed huge cash reserves that were available for investment. At the same time, public shareholders continued to reward management teams that used cash for acquisitions."
While overall M&A value surged on the back of multibillion-dollar acquisitions, volume stagnated. At the end of last year, the deal count stood at 4,819, down 8 percent from 2014 (5,237).
"The market has been top-heavy, with overall deal value soaring even as the number of deals remained static," Reiss added. "Activity has been dominated by giant megadeals concentrated in specific sectors. Any fall in megadeal flow could significantly affect aggregate value in 2016. Pricing and recent stock market fluctuations could also cause concern this year."
Key findings of the report include:
One of the major stories of 2015 was the prevalence of Asian players that have been showing a significant interest in US assets. Japanese companies have been looking to the US for growth, particularly where brands have a strong foothold in the country. With China devaluing the yuan against the dollar in a bid to jumpstart its economy and US GDP holding up well, Chinese companies also looked to the States as a relatively safe haven.
The pharmaceuticals, medical and biotechnology sector accounted for almost US$300 billion worth of deals in 2015. In volume terms, technology and industrials were well ahead of other industries with almost 800 deals each.
Private equity activity in 2015 reflected the broader M&A market. Buyout value surged in H2 2015 to US$122.68 billion, up almost US$40 billion on H2 2014. However, buyout volume dipped 15 percent over the same period.
Looking ahead, the November presidential elections could affect companies' enthusiasm for M&A. This means that we could see a dip in the third and fourth quarters, as companies try to get deals across the line before the election.