Paul Weiss Offers M&A at a Glance for January 2018

In U.S. and global M&A activity for January 2018, total deal volume by dollar value decreased, while the total number of deals increased. In the U.S., deal volume decreased by 29.3% to $170.57 billion, while the number of deals increased by 42.6% to 884. Globally, deal volume decreased by 31.2% to $324.45 billion, while the number of deals increased by 9.9% to 3,118. The sharp decreases in deal volumes are likely less reflective of any dramatic decline in deal flow, but rather due to the 12-month highs set in December 2017, especially given that January 2018 marked the third-highest global and U.S. deal volumes of the preceding 12-month period.

Strategic vs. Sponsor Activity

In the U.S., strategic deal volume decreased by 47.0% to $108.33 billion, and the number of deals increased by 34.9% to 653. Globally, strategic deal volume decreased by 38.0% to $241.62 billion and the number of strategic deals increased by 7.0% to 2,714. Figure 1 and Annex Figures 1A—4A. Sponsor-related activity increased across all measures. In the U.S., sponsor-related deal volume increased by 67.6% to $62.24 billion, while the number of deals increased by 69.9% to 231, each of which were 12-month highs. Globally, sponsor-related deal volume increased by 1.4% to $82.82 billion, while the number of deals increased by 34.2% to 404, a 12-month high.

Crossborder Activity1

U.S. inbound deal volume increased by 79.4% to $39.10 billion, and the number of U.S. inbound deals increased by 11.0% to 121. Outbound U.S. deal volume increased by 47.0% to $15.45 billion, and the number of U.S. outbound deals increased by 22.7% to 119. Figure 1 and Annex Figures 5A—7A. Globally, crossborder activity in January 2018 followed similar trends to the overall market, with deal volume decreasing by 25.8% to $88.68 billion, and the number of deals increasing by 6.7% to 685.

In U.S. inbound activity, Canada was the leading country of origin for January 2018, with $14.01 billion in deal volume. Canada retained the lead for U.S. inbound activity by dollar value over the last 12 months, with $77.20 billion in volume, and remained the leading country of origin by number of U.S. inbound deals in January (38) and over the last 12 months (410). Japan and Bermuda were the largest targets for U.S. outbound activity in January by deal volume ($6.10 billion and $6.08 billion, respectively). The U.K. was the leader in outbound deal volume over the last 12 months ($29.05 billion). Canada took the lead in the number of U.S. outbound deals in January (25), while the U.K. retained its lead over the last 12 months (259). Figure 3.

U.S. Deals by Industry

Computers & Electronics was the most active target industry by dollar value in January 2018 ($34.64 billion) and over the last 12 months ($323.74 billion). Computer & Electronics also remained the most active target industry by number of deals in January (264) and over the last 12 months (2,842). Figures 2 and 5.

U.S. Public Mergers

As for U.S. public merger deal terms in January 2018, average target break fees was 3.4%, marginally below the 12-month average of 3.6%. Average reverse break fees was 4.6%, below the 12-month average of 5.5%. Figures 6 and 7. The use of cash consideration in January 2018 decreased to 60.0%, slightly below its 12-month average of 60.7%. Figure 9. The incidence of tender offers as a percentage of U.S. public mergers was 26.7%, above the 12-month average of 20.5%. Figure 11. Finally, the incidence of hostile offers in January 2018 was 11.1%, slightly above the 12-month average of 10.3%. Figure 12.

ENDNOTE

1    Global crossborder transactions are those where the acquirer and the target have different nationalities. Nationality is based on where a company has either its headquarters or a majority of its operations. U.S. crossborder transactions are those transactions where the acquirer and the target have different nationalities and either the acquirer (“Outbound”) or the target (“Inbound”) has a U.S. nationality.

All Figures referenced 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, February 2018,” available here.