BY Richard Summerfield
2015 was a momentous year for M&A activity, with mega-deals once again a key feature of the corporate landscape.
New data from Thomson Reuters suggests that M&A activity totalled $4.2 trillion in 2015, breaking the all time annual record thanks to a 42 percent increase over 2014’s record. Mega deals were undoubtedly the driving force behind the impressive figures recorded this year.
"It's the most prolific year that we've ever seen since we began tracking M&A in 1980," said Matthew Toole, Thomson Reuters’ Director of Deals Intelligence. "Companies are looking for revenue growth, they're also looking to streamline and get rid of businesses that are non-core.
"And as companies consolidate at the top, it filters down to other companies looking to see what do we need to do to compete in this landscape," he added.
According to Thomson Reuters, the $191.5bn merger of Pfizer and Allergan was the deal which pushed 2015 past 2007’s record of $4.1 trillion. The healthcare and pharmaceutical sectors were two of the most prolific for deal activity, seeing $649.4bn and $415.6bn worth of deal activity respectively.
In the context of recent years, 2015 was a show stopping year for both industries. The $649.4bn worth of deals recorded in the healthcare space equates to more than the previous two full years worth of deals combined. For the pharma sector, 2015 exceeded the combination of the last three full years combined.
Financial engineering played a significant role in the success of some of the bigger deals in the pharma and healthcare spaces. Inversion deals, which have angered politicians on both sides of the aisle in the US, have continued to be a major factor in US deal making. Pfizer took advantage of an inversion to relocate to Ireland, and substantially reduce its tax bill.
Away from the pharma and healthcare industries, there were a number of other impressive deal making hauls. Though the number of announced deals globally declined from 2014 by 2.1 percent to 39,687, there was record M&A activity in five sectors: healthcare, consumer products, retail, technology and industrials.
Furthermore, for the first time ever, there were three consecutive trillion-dollar-plus quarters in 2015, thanks to large deals including the Pfizer/Allergan tie up and Anheuser-Busch InBev's planned $120.8bn merger with SABMiller.
However, 2016 is likely to be a more challenging year. With political uncertainty likely and further interest rate increases expected, we may see a drop in deal making.