M&A market booms

BY Richard Summerfield

The global M&A market is booming with average deal sizes climbing in the first half of the year, according to Pitchbook’s ‘2Q 2018 Global M&A Report’.

“The M&A market is inexorably linked with business sentiment, corporate fundamentals and macroeconomic forces,” said Wylie Fernyhough, an analyst at PitchBook. “With all these indicators continuing to trend positively, the global M&A boom shows no signs of stopping and the announced deals should ensure M&A activity continues to flourish throughout the rest of the year.”

In Q2, across the US and Europe there were 4735 completed deals totalling $987.8bn in value, a decline of 2 percent and an increase of 24 percent respectively, over the first quarter of 2018. Q1 saw 4823 deals worth $799.7bn. The mega-merger market remained strong in H1, with 31 deals recorded worth in excess of $5bn. Vodafone's $21.8bn purchase of UPC Czech was one of five deals above $10bn which closed in Q2 and which caused a rise in average deal value.

In total, across Europe, there were 3424 transactions completed totalling $569.7bn, compared to 5336 deals valued at $797.8bn achieved in the same period last year. Despite this decline, European M&A has not yet suffered the prophesised negative effects of Brexit.

Thirteen mega-deals were closed in 2018, five of which were in the UK, including announced deals such as Takeda’s bid for Shire worth $62bn and the ongoing $34bn tug of war between Fox and Comcast for Sky. North America saw 5213 deals completed, worth $1 trillion.

The financial services sector saw deal value fall in H1 2018, however, as fewer large deals closed. The sector saw 790 completed transactions with a total value of $161.5bn, down from 960 deals with a value of $227.6bn in the first half of 2017. Regardless of the slow start to 2018, the sector did see two notable deals in Q2, including the $3bn acquisition of Pure Industrial by Blackstone and Ivanhoé Cambridge.

One of the key deal drivers going forward may be the ongoing shift in global interest rates. In North America rates have risen, whereas in the eurozone rate rises may still be a year away. As a result, many companies may be pushing through acquisitions in the short term in order to secure more attractive financing before rates rises potentially derail transactions, making them financially unattractive.

Report: 2Q 2018 Global M&A Report

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