M&A at a Glance (July 2016)

July 2016, Issue 52

M&A activity in June 2016 was relatively flat, as compared to the last two months.  In the U.S., overall deal volume decreased by 10.7% to $164.47 billion, and the number of deals was flat at 752.  Global M&A performance was on a similar trajectory, with total volume decreasing by 3.6% to $331.29 billion, and the number of deals decreasing by 1.6% to 2,936.  The strategic market experienced the largest downward trend, with the U.S. total strategic deal volume decreasing by 11.2% to $122.42 billion, and the number of deals decreasing by 3.0% to 579.  Globally, strategic deal volume decreased by 6.2% to $255.62 billion, and the number of deals decreased by 2.4% to 2,576.  Sponsor-related activity experienced moderate increases by some metrics.  Although U.S. sponsor-related deal volume decreased by 9.5% to $42.04 billion, the number of deals increased by 12.3% to 173.  Globally, sponsor-related activity fared better, with increases in both deal volume (6.5% to $75.67 billion) and number of deals (4.0% to 360).  Figure 1 and Annex Figures 1-A - 4-A.

Crossborder activity experienced significant declines in June 2016.  In the U.S., inbound deal volume decreased by 78.4% to $17.17 billion and outbound deal volume reached a new 12-month low, decreasing by 54.6% to $7.27 billion.  The number of inbound U.S. crossborder deals increased by 5.3% to 138, while the number of outbound U.S. crossborder deals decreased by 8.8% to 114.  The global crossborder market followed similar trends as the U.S crossborder market.  Figure 1 and Annex Figures 5A-7A.  In June 2016, Canada regained its position as the leading country of origin for inbound U.S. activity by both volume ($5.24 billion) and number of deals (43), and maintained its trailing 12-month lead in both categories. The U.K. took the lead in outbound U.S. activity in June 2016 by both volume ($2.15 billion) and number of deals (27), and maintained its lead position for trailing 12-month deal volume.  Figure 3. 

Computer & Electronics was the most active target industry by deal volume in the U.S. in June 2016 ($53.51 billion), boosted by Microsoft's $26.40 billion offer for LinkedIn.  As a result of its strong month, Computer & Electronics also captured the lead position as the most active target industry by volume over the trailing 12 months ($346.37 billion), displacing Healthcare, which has held this position since October 2014.  Figure 2. 

For U.S. public mergers, average reverse break-fees in June 2016 were higher than their 12-month average (6.4%, as compared to 5.2%), while the average target break fee remained in line with its 12-month average (3.6% in June 2016, as compared to 3.5%).  Figure 7.  Cash continued to be used as the only form of consideration above its 12-month average (70.6%, as compared to 57.4%).  Figure 9.  The incidence of tender offers as a percentage of U.S. public mergers significantly increased to 47.1% in June 2016 as compared to its 12-month average of 19.3%.  This is the highest percentage of tender offers that we have seen for over two years.  Finally, we note that the incidence of hostile offers as a percentage of U.S. public mergers increased to 25.0%, as compared to its 12-month average of 16.7%.  Figures 11 and 12.

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