Global M&A Activity Hits Post-crisis Peak in 2014

Global merger and acquisition merger and acquisition activity in the third quarter of 2014 was the highest since the global financial crisis broke seven years ago, with the year’s total of US$3,230bn only 11.8% less than in the peak year of 2007, reports Mergermarket.

It was the third highest annual total recorded by the financial news and analysis firm since 2001. However, after successive quarterly increases from Q413 to Q214 there was a reversal in the second half of last year and the Q414 total of US$787.8bn was down 7.5% from Q3.

Among other findings in Mergermarket’s ‘Global M&A roundup’ for 2014 were:

  • A surge from Europe toward US targets, record high deal valuations and exit levels, and a deal count nearing 2007’s peak led US M&A activity to reach a record high last year. Total deal value soared 56.6% from US$900.1bn in 2013 to US$1,409.4bn in 2014, while the total deal count rose 21.5% from 3,937 transactions to 4,782.
  • US firms commanded some of the highest deal valuations globally, with average deal values increasing 30.15% in the past year, reaching a record high of US$ 616.3m in 2014. Premiums paid jumped to 29% in 2014, from 26% in 2013, with an earnings before interest, taxation, depreciation and amortisation (EBITDA) multiple of 14.5x.
  • US private equity (PE) firm exits reached an all-time high in 2014 with 958 deals valued at US$262.1bn, up 70.6% by value from 2013’s US$ 153.6bn on 735 deals. Along with a general rise in technology transactions, 2014 saw an upswing in exits in the space, reaching the highest deal count and value on record: 292 deals worth US$49.6bn, more than double 2013’s value of US$ 24.7bn. In the pharmaceutical, medical and biotech sector, the US$42.3bn worth of exits in 2014 was 56.1% higher than the previous peak in 2007 of US$ 27.1bn.

There was an abundance of cross-border deal making overall in 2014, demonstrated by the highest deal count record and the second highest value. The 5,501 deals worth US$1,399.7bn increased 82.6% by value compared to 2013 with 630 more announcements.

The size of cross-border transactions played a role in the deal value increase. The average deal size for cross-border deals jumped to US$453.9m, up from US$291.4m in 2013 and above the 2007 peak of US$437.7m.

The inflated deal size was in part due to the sudden attention to US companies from Europe. The total value of deals involving European companies targeting the US hit the highest on record at US$259.7bn with 421 announcements. For example, German corporations made three of their largest ever US-based acquisitions during 2014, with all three valued over US$12.7bn.

In Europe, the top three transactions involving non-European bidders targeting European companies all originated from the US – Medtronic’s acquisition of Covidien (Ireland) for US$45.9bn; Walgreen’s purchase of the remaining 55% stake in Alliance Boots (Switzerland) for US$23.8bn; and General Electric’s acquisition of Alstom’s thermal and renewable power and grid business (France) for US$12.3bn.

France was the target country for two of the top five European deals, demonstrating the growth in size of French transactions during 2014. Consequently, for the first time on record France was the most active country in 2014 with US$161.4bn-worth of deals, the highest value since 2007’s US$204.1bn and a 327.5% surge on the 2013 total of US$37.7bn.

The UK was previously the most targeted country in Europe until 2014 despite its M&A value increasing by 28.7% to US$154.5bn from 2013.

Tax inversion deals boosted total pharmaceutical, medical and biotech values as individual price tags climbed, with two deals above US$ 10bn (against none in 2013), the acquisition of Covidien and the sale of Glaxo SmithKline’s oncology business.

In total, there were 10 deals above US$ 10bn, against six in 2013). Pharma also played a pivotal role in cross-border deal flow, amounting to close to a quarter of total inbound (US$74.1bn) and 37.4% of outbound (US$136.7bn).

In the league of financial advisors to M&A deals, Deutsche Bank jumped to fifth place from 10th, having worked on 47 more deals in 2014 compared to 2013. Perella Weinberg, Centerview and Greenhill all re-entered the top 20 ranking by value having been absent from the top 20 table for seven, six and four years respectively.


Related reading