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

M&A activity in October 2018 remained mixed, but included more positive indicators compared to September and the general declining trend line so far this year. Deal volume by dollar value[1] significantly increased overall, by 98.2% to $154.56 billion in the U.S., and by 35.5% to $328.77 billion globally. The number of deals, however, decreased slightly overall, by 2.6% to 371 in the U.S. (among the lowest levels since the beginning of this publication in 2012) and by 4.5% to 2,248 globally.

Strategic vs. Sponsor Activity

Reversing a more typical trend over the last year, strategic deals showed less strength than sponsor-related deals. The number of strategic deals decreased in October 2018 by 8.2% to 258 in the U.S. and by 5.6% to 1,981 globally. However, strategic volume by dollar value increased significantly by 146.5% to $107.52 billion in the U.S. and by 49.5% to $241.55 billion globally. Figure 1 and Annex Figures Figures 1A4A. The number of sponsor-related deals, in contrast to the number of strategic deals, increased in the U.S. by 13% to 113 and globally by 4.3% to 267, and sponsor-related deal volume as measured by dollar value increased in the U.S. by 36.9% to $47.03 billion and globally by 7.5% to $87.22 billion. Figure 1 and Annex Figures Figures 1A4A.

Crossborder Activity

Globally, the number of crossborder deals increased by 5.7% to 592 while crossborder deal volume by dollar value decreased by 3.8% to $92.64 billion.

In the U.S., the number of crossborder deals decreased in October 2018. U.S. inbound transactions decreased by 2.7% to 72, and U.S. outbound transactions decreased by 6.0% to 94, each representing the second lowest level for such activity in the last 12-month period. U.S. crossborder activity as measured by dollar value was mixed, with inbound volume by dollar value increasing by 10.8% to $19.32 billion but U.S. outbound volume by dollar value decreasing by 73.5% to $6.68 billion. Figure 1 and Annex Figures 5A—7A.

Canada retained its lead for U.S. inbound activity by number of deals in the month of October (16) and over the last 12-month period (309). In addition, Canada was the leading country for U.S. inbound activity as measured by total dollar value in October ($4.75 billion) and retained its lead over the last 12-month period ($86.14 billion). The U.K. was again the leading destination country for U.S. outbound transactions by number of deals in October (27) and over the last 12-month period (282). Japan was the leading destination country for U.S. outbound activity by dollar value in October ($2.05 billion), with the U.K. retaining its lead over the last 12-month period ($89.75 billion). Figure 3.

U.S. Deals by Industry

Computers & Electronics remained the most active target industry by number of deals in October (97) and over the last 12-month period (2,251). Computers & Electronics was also the most active target industry by dollar value in October ($53.73 billion), as well as over the last 12-month period ($325.26 billion). Figure 2.

U.S. Public Mergers

As for U.S. public merger deal terms in October 2018, average target break fees were almost even with their 12-month average, at 3.7% (compared to a 12-month average of 3.8%), while average reverse break fees were slightly above their 12-month average, at 6.0% (compared to a 12-month average of 5.8%). Figures 6 and 7. Two transactions in October included a go-shop provision. Figure 8. The use of cash consideration in October decreased to 52.6% but remained above the 12-month average of 51.4%. Figure 9. Tender offers for U.S. public mergers in October (5.3%) fell significantly below the 12-month average (12.7%), and hostile/unsolicited offers in October (9.5%) also fell below the 12-month average (13.9%). Figures 11 and 12.

ENDNOTE

[1] Each metric in this publication that references deal volume by dollar value is calculated from the subset of the total number of deals that includes a disclosed deal value.

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 — November 2018,” available here.

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