Paul Weiss Offers M&A 2016 Year-End Roundup

2016 was an active year for M&A, though year-end results did not surpass record-levels set in 2015.  Global deal volume for the year was $3.7l trillion and U.S. deal volume was $1.66 trillion (14.8% and 16.4% lower than their respective record levels in 2015).  Sponsor-related deal volume for the year was $776.52 billion globally and $396.69 billion in the U.S. (down 22.6% and 32.9%, respectively, from 2015 levels and 12.5% and 6.5%, respectively, from 2014 levels).  Strategic deal volume was $2.93 trillion globally and $1.26 trillion in the U.S., surpassing 2014 levels though falling short of 2015 record levels by approximately 10%.  Figure 1.  There were fewer “megadeals” in 2016 than in both 2015 and 2014, with the average value of U.S. public mergers decreasing by 24.3% from 2015 levels and 16.1% from 2014 levels.  Figure 2.

In terms of M&A activity by sector, the top five U.S. target industries by volume consisted of Computers & Electronics, Utility & Energy, Healthcare, Oil & Gas and Leisure & Recreation.  Telecommunications, which was a top five target industry in 2014 and 2015, dropped out of the top five in 2016.  Figure 4.  Canada maintained its lead in both investments by volume and number of deals for inbound U.S. transactions, while the U.K. remained the leading country for outbound investments by U.S. companies by volume and overtook Canada as the leading country for outbound transactions as measured by number of deals.  Figure 3.  Overall, global crossborder deal volume remained in line with 2015 levels, decreasing by only 2.1%.  Crossborder investments involving U.S. companies were stronger than in 2015, with U.S. inbound and outbound crossborder transactions increasing by 16.4% and 13.4%, respectively.  Figure 1.

On the U.S. public merger front, there were a few noteworthy observations from 2016:

  • Reverse break fees in sponsor-related transactions decreased, from 7.4% in 2015 to 6.3% in 2016.  Target break fees (3.5%), and reverse break fees in strategic transactions (4.8%), remained relatively consistent with their 2014 and 2015 levels.  The spread between reverse break fees for sponsor-related transactions and those for strategic transactions dropped, from 2+% levels in both 2014 and 2015 to about 1.5% in 2016.  Figure 5.
  • The percentage of all cash transactions increased, from 50.3% in 2014 and 53.3% in 2015 to 63% in 2016. The percentage of cash and stock transactions decreased, from 19.1% in 2014 and 19.3% in 2015 to 15.8% in 2016.  The incidence of transactions with election consideration (offering a choice between stock and cash) fell, from 10% and 11.7% of all transactions in 2014 and 2015, respectively, to 5.4% of all transactions in 2016.  Figure 6.
  • The use of go-shop provisions in mergers involving financial buyers continued its recent upward trend, from 33.3% and 34.8% in 2014 and 2015, respectively, to 46.9% in 2016. The use of go-shop provisions in mergers involving strategic buyers declined from 8% in 2015 to 3.3% in 2016. Figure 8.
  • The percentage of U.S. public mergers that were hostile or unsolicited continued its downward trend, from 15.7% and 13.9% in 2014 and 2015, respectively, to 13% in 2016. Figure 9.

The figures reference above are all available here.

Additionally, you can find a video summary of this post 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–2016 Year-End Roundup,” dated January 16, 2016, and available here.