Paul Weiss Offers M&A at a Glance for 2017

2017 was an active year for M&A, though year-end results generally declined relative to 2016. Global deal volume for the year was $3.57 trillion and U.S. deal volume was $1.48 trillion (down 3.2% and 10.5%, respectively, from 2016). Sponsor-related deal volume for the year was $814.35 billion globally and $402.15 billion in the U.S. (up 5.0% and 0.6%, respectively, from 2016). Strategic deal volume was $2.75 trillion globally and $1.08 trillion in the U.S. (down 5.4% and 14.0%, respectively, from 2016). Figure 1. The average value of U.S. public mergers decreased by 21.7% from 2016 levels (from $4.11 billion to $3.21 billion). Figure 2.

In terms of M&A activity by sector, the top five U.S. target industries by volume consisted of Computers & Electronics, Healthcare, Oil & Gas, Telecommunications and Real Estate/Property. Utility & Energy and Leisure & Recreation, which were top five target industries in 2016, dropped out of the top five target industries in 2017. Figure 4. Canada maintained its lead in both investments by volume and number of deals for inbound U.S. transactions. Switzerland, however, surpassed the U.K. as the leading country for outbound investments by U.S. companies by volume, and the U.K. remained the leading country for outbound transactions as measured by number of deals. Figure 3. Overall, global crossborder deal volume decreased 18.0% relative to 2016. Crossborder transactions involving U.S. companies decreased in 2016, with U.S. inbound and outbound transactions decreasing by 42.5% and 37.2%, respectively. Figure 1.

On the U.S. public merger front, there were a few noteworthy observations from 2017:

  • Break fees increased over 2016 levels, by a modest 3.5% to 3.6% for target break fees and a more significant 5.2% to 5.8% for reverse break fees. Reverse break fees in sponsor-related transactions increased from 6.3% in 2016 to 7.0% in 2017, and reverse break fees in strategic transactions increased from 4.8% in 2016 to 5.4% in 2017, respectively. Figure 5.
  • The percentage of all cash transactions fell from 64.9% in 2016 to 60.7% in 2017. The percentage of cash and stock transactions decreased from 14.2% in 2016 to 10.7% in 2017. The incidence of all stock transactions increased from 15.4% in 2016 to 22.5% in 2017, possibly reflecting the recent run-up in the equity markets. Figure6.
  • The use of go-shop provisions in U.S. public mergers decreased from 11.7% in 2016 to 6.2% in 2017. The use of go-shop provisions in mergers involving financial buyers decreased from 45.7% in 2016 to 10.7% in 2017, whereas the use of go-shop provisions in mergers involving strategic buyers increased from 3.9% in 2016 to 5.3% in 2017. The average go-shop window, as measured in days, for mergers involving financial buyers increased from 33.9 days in 2016 to 46.7 days in 2017. Figure 8.
  • The percentage of U.S. public mergers that were hostile or unsolicited decreased from 14.6% in 2016 to 10.7% in 2017. Figure9.

All Figures reference above are available here.

This post comes to us from Paul, Weiss, Rifkind, Wharton & Garrison LLP. It is based on the firm’s memorandum, “M&A at a Glance — 2017 Year-End Roundup,” available here.