Before the year is up, we decided to do one final overview of this year’s M&A trends to see if there is a certain pattern that one can expect to continue into next year.
During the first half of the year there was a global slowdown in dealmaking on all markets, except the US, however during Q3 the global slowdown in dealmaking spread to the US as well, thus causing global M&A to drop 11.4% YoY on last year to USD 2.49 trillion (across 13,304 deals). Activity was particularly subdued in the third quarter of the year, when USD 622.2bn worth of deals were struck globally, down 21.2% when compared to Q3 2018 and with 1,164 fewer deals than last year.
Value of Global M&A Deals
The drop in global M&A activity spilled to the US market during Q3, which had so far seemed immune to the global downward trend. At USD 262.9bn in Q3 2019, US M&A has fallen to its lowest quarterly value since Q1 2016 (USD 254.6bn). The current value of USD 1.25 trillion recorded in the US M&A market is still marginally up on the same period last year (USD 1.23 trillion). Note that this translates to 50% share of global M&A activity, down from 52.5% recorded in the first half of the year.
Marred by the trade and tech war between the US and China and persistent political instability in Hong Kong, YTD M&A activity in Asia is down 26.5% YoY and amounts to USD 417.2bn. China and Hong Kong accounts for only 7.8% of global M&A activity so far this year, down from 11.4% last year and a far cry from 2015, when they were responsible for 15.6% of the total global value of deals. In fact, the largest deal of the year so far in the region was struck between Japan and Australia with Asahi’s USD 11.3bn acquisition of Australia-based brewery Carlton & United Breweries from Anheuser-Busch InBev in July.
After an abysmal performance during the first half of the year, Europe has enjoyed a relative recovery over the summer, with the value of deals in Q3 2019 reaching USD 166.5bn across 1,551 transactions. When compared to Q3 2018, this represents a 2.3% YoY decrease when the region saw 1,974 deals worth USD 170.5bn. However, note that European M&A is still down 29.4% when compared to the same period last year.
Turning our attention to the sector breakdown, the Pharma, Medical & Biotech sector never fails to deliver and managed to put three deals in Q3’s global top 10. These deals include the creation of a mighty generic drugs maker through the combination of US-based Mylan and Pfizer’s Upjohn, which is itself expected to engage in M&A, according to Mergermarket.
Global M&A Deals Sector Breakdown
One should also note that the key trend in the global M&A market in 2019 relates to the deal size of deals concluded. Whether they are motivated by the desire to get more growth, or a way to secure future survival, deals are getting larger. On the back of the longest equity bull market in history, and amid persistently low interest rates, corporates have ample cash reserves and appealing debt financing options at their disposal to pursue M&A. This context and the growing feeling that it will not last forever are pushing valuations up. At USD 424.6m, the average size of deal with a disclosed value is up from USD 380.1m in 2018.