Despite an increase in M&A activity over the past three months, deal trends in February 2018 retreated towards their 12-month averages, following banner months in November and December, both of which featured some of the largest deals we have seen in the last year. In the U.S., deal volume by dollar value decreased by 52.1% to $82.61 billion, the second-lowest level of the preceding 12‑month period, and the number of deals decreased by 21.5% to 716. Globally, deal volume decreased by 10.5% to $295.03 billion and the number of deals decreased by 20.1% to 2,639 (a 12-month low).

Strategic vs. Sponsor Activity

Strategic and sponsor-related activity each experienced significant decreases across all metrics. In the U.S., strategic deal volume decreased by 49.1% to $55.84 billion and the number of deals decreased by 18.2% to 557. Globally, strategic deal volume decreased by 8.7% to $223.49 billion and the number of deals decreased by 20.1% to 2,310, a 12-month low. Figure 1 and Annex Figures 1A—4A. As for sponsor-related activity, U.S. deal volume decreased by 57.4% to $26.77 billion and the number of deals decreased by 31.2% to 159. Global sponsor-related deal volume decreased by 15.7% to $71.54 billion and the number of deals decreased by 20.3% to 329. Figure 1 and Annex Figures 1A—4A.

Crossborder Activity¹

U.S. inbound deal volume decreased by 70.6% to $11.54 billion and the number of U.S. inbound deals decreased by 11.4% to 109. U.S. outbound deal volume increased by 242.63% to $54.83 billion, driven by Comcast Corporation’s unsolicited offer to acquire Sky plc for $41.45 billion, while the number of U.S. outbound deals decreased by 6.3% to 119. Figure 1 and Annex Figures 5A—7A. Globally, crossborder deal volume increased by 7.9% to $98.41 billion and the number of crossborder deals decreased by 10.5% to 664.

In U.S. inbound activity for the month of February, Switzerland was the leading country of origin by dollar value ($4.55 billion) and Canada remained the leading country of origin by number of deals (30). Canada also remained the leader for U.S. inbound activity over the last 12 months, both by dollar value ($72.41 billion) and number of deals (402). The U.K. was the February leader in U.S. outbound deal volume ($44.74 billion) and retained its lead over the last 12 month period ($73.19 billion). The U.K. also tied Canada as the most active target for the number of U.S. outbound deals in February (20) and retained its 12-month lead (253). Figure 3.

U.S. Deals by Industry

Computers & Electronics was the most active target industry by dollar value in February 2018 ($18.24 billion) and over the last 12 months ($324.70 billion). Computers & Electronics also remained the most active target industry by number of deals in February (241) and over the last 12 months (2,870). Figure 2.

U.S. Public Mergers

As for U.S. public merger deal terms in February 2018, average target (3.4%) and reverse (5.4%) break fees were near their 12‑month averages. Figures 6 and 7. No public mergers in February 2018 included a go-shop provision. Figure 8. The use of cash consideration in February 2018 decreased to 46.2%, below its 12-month average of 60.0%. Figure 9. The incidence of tender offers as a percentage of U.S. public mergers was 7.7%, below its 12-month average of 19.4%. Figure 11. Finally, the incidence of hostile offers in February 2018 was 15.0%, above the 12-month average of 11.1%. 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, March 2018,” available here.