M&A at a Glance (August 2016)

M&A activity declined by most measures in July 2016.  Deal volume, as measured by dollar value, decreased in the U.S. by 25.8% to $126.52 billion, and globally by 2.3% to $326.23 billion.  The total number of deals reached new 12-month lows, both in the U.S. and globally, decreasing by 20.7% to 614 and by 12.2% to 2,725, respectively.  Both sponsor and strategic activity cooled in July 2016.  Sponsor-related deal volume decreased in the U.S. by 21.3% to $37.54 billion and globally by 14.7% to $65.41 billion.  Strategic-related deal volume declined in the U.S. by 27.6% to $88.98 billion, while slightly increasing globally by 1.3% to $260.82 billion.  The number of deals for sponsor-related and strategic transactions declined in the U.S. (by 37.1% to 112 and by 15.8% to 502, respectively), as well as globally (by 16.9% to 304 and by 11.6% to 2,421, respectively).  Figure 1 and Annex Figures 1A - 4A.

While crossborder deal volume, as measured by dollar value, revived modestly after a slow June 2016, the number of crossborder deals continued to decline, also setting a 12-month low.  In the U.S., inbound deal volume increased by 34.9% to $29.01 billion, while the number of inbound deals decreased by 23.8% to 109.  Outbound U.S. deal volume increased by 28.3% to $9.43 billion, while the number of deals decreased by 18.9% to 99.  Global crossborder deal volume increased by 51.5% to $120.18 billion, while the number of deals declined by 15.5% to 652.  Figure 1 and Annex Figures 5A-7A.  France took over as the leading country of origin for inbound U.S. activity by volume ($13.68 billion), and Canada retained its lead in terms of number of deals (34).  Notably, Germany gained the lead position for inbound U.S. deal volume for the last 12 months ($92.38 billion), overthrowing Canada ($88.52 billion), which has held the top spot since June 2015.  This is largely attributable to Bayer AG's $54.70 billion offer to acquire Monsanto Company in May 2016, which remains the third-largest announced U.S. public merger over the last 12 months. Figure 5.  Canada nevertheless retains its dominant position in terms of number of deals over the last 12 months (429).  Figure 3.  The U.K. maintained the lead in outbound U.S. activity by deal volume ($3.10 billion) in July 2016 and for the last 12 months ($58.23 billion), while Canada took the lead for outbound number of deals in July 2016 (21) and for the last 12 months (332).

Computers & Electronics maintained its top position as the most active target industry by deal volume in the U.S. in July 2016 ($45.23 billion) and for the last 12 months ($373.88 billion), boosted by the largest U.S. public merger in July 2016: Linear Technology Corporation's $14.39 billion offer for Analog Devices, Inc. Figure 5.  Computers & Electronics also maintained its lead position in terms of number of deals, both in July 2016 (156) and for the last 12 months (2,646).  Figure 2.

No U.S. public mergers in July 2016 had a go-shop provision.  Figure 8.  Cash consideration was used above its 12-month average (80.0%, as compared to 58.5%).  Figure 9.  For the second month in a row, the incidence of tender offers in U.S. public mergers (40.0%) was significantly higher than the 12-month average (21.0%).  Figure 11.  There were no hostile/unsolicited offers in July 2016.  Figure 12.

Finally, we refer you with interest to a recent report by Cornerstone Research, which shows a significant decrease in M&A litigation in 2015 and the first half of 2016.  According to the report, Shareholder Litigation Involving Acquisitions of Public Companies-Review of 2015 and 1H 2016 M&A Litigation, the percentage of M&A deals valued over $100 million and challenged by shareholders was 84% of such announced deals in 2015 and only 64% in the first six months of 2016, representing the first time since 2009 that litigation rates for such M&A deals have fallen below 90%.  The report attributes this drop to the Delaware Court of Chancery's decision in Trulia and its effect on reducing disclosure-only settlements.  For the Cornerstone Research report, click here. For the Paul Weiss memorandum on the Trulia decision, click here.  We will continue to monitor the market to see if this litigation trend continues and whether there will be any effect on deal terms.

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