M&A volume in October 2016 increased to record levels, as measured by total dollar value, largely due to a spike in the number of megadeals, with eight October deals valued at or above $10 billion dollars. Total deal volume in the U.S. and globally rose in October 2016, by 163% to $341.10 billion and by 75.6% to $549.10 billion, respectively—the highest monthly deal volume totals since the inception of this publication in April 2012.  Despite the increase in M&A volume, however, the number of deals continued to fall towards record-low territory, with U.S. deals falling by 8.5% to 668 and global deals by 10.4% to a twelve-month low of 2,567.  Figure 1 and Annex Figures 1A-4A.

The surge in overall deal volume, as measured by dollar value, was driven  primarily by strategic activity, although sponsor-related deal volume also rose.  Strategic transactions accounted for a large portion of total deal volume, both in the U.S. and globally (91.2%, as compared to 79.1% over the last 12 months; and 87.3%, as compared to 81.3% over the last 12 months, respectively).  Strategic deal volume increased in the U.S. by 176.8% to $311.31 billion and globally by 79.6% to $479.48 billion.  The number of strategic deals declined in the U.S. by 10.2% to 536 and globally by 11.8% to 2,258.  In sponsor-related activity, U.S. deal volume increased by 73% to $29.79 billion, and global deal volume increased by 52.2% to $69.62 billion.  The number of sponsor-related deals in October 2016 remained near September levels, both in the U.S. and globally (132 and 309, respectively).  Figure 1 and Annex Figures 1A-4A.

Crossborder activity followed a similar trend, with particularly strong results in the U.S. outbound market.  Outbound U.S. deal volume increased by 208.7% to $61.31 billion, driven primarily by Qualcomm Incorporated’s offer to acquire NXP Semiconductors N.V. for approximately $47.00 billion, and the number of deals increased by 10.9% to 112.  Inbound U.S. deal volume increased by 44.4% to $98.53 billion, while the number of deals decreased by 16.2% to 114.  Globally, crossborder deal volume rose by 52.2% to $205.95 billion and the number of deals decreased by 11.7% to 610, reaching a new 12-month low.  Figure 1 and Annex Figures 5A-7A.  The Netherlands claimed the lead for monthly outbound U.S activity by volume in October 2016 ($48.14 billion), while the U.K. maintained its 12-month lead ($72.22 billion).  As for inbound activity, the U.K. overtook Canada as the leading country of origin in deal volume in October 2016 ($60.95 billion), while Canada maintained its 12-month lead ($120.01 billion).  Figure 3.

Leisure and Recreation was the most active target industry by deal volume in the U.S. in October 2016 ($108.75 billion), boosted by AT&T Inc.’s $83.07 billion offer to acquire Time Warner Inc. Consumer Products was the second-most active target industry, driven by British American Tobacco Plc’s $46.55 billion offer to acquire Reynolds American Inc.  The AT&T offer and the British American Tobacco offer are two of the largest U.S. public mergers announced over the last 12 months.  Figure 5. Computers & Electronics remained the most active target industry by number of deals for the month (168) and maintained its position as the most active target industry for the last 12 months, as measured by both volume ($274.19 billion) and number of deals (2,482).  Figure 2.

With respect to U.S. public mergers, notwithstanding a spike in average deal value, both break and reverse break fees remained in line with historical levels.  Figures 6-7.  No transaction in October 2016 involving a strategic buyer had a go-shop provision.  Figure 8.  In line with the rise of strategic transactions, the use of cash consideration in October 2016 was below its 12-month average (35.7%, as compared to 62.5%).  Figure 9.  Finally, the incidence of tender offers as a percentage of U.S. public mergers decreased to 7.1% (as compared to its 12-month average of 22.8%), again, possibly as a result of the prominence of strategic deals in October, which may not experience any timing or other advantages from using a two-step merger structure.  Figure 11.

The figures reference above are all available here.

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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 2016),” dated November 15, 2016, and available here.