North American and European M&A Activity on Pace to Match Recent Years; Financial Services Sector Adjusts to Ongoing Trends
SEATTLE, Aug. 9, 2018 — PitchBook, the premier data provider for the private and public equity markets, today released its 2Q 2018 Global M&A Report, which found an uptick in average deal size that drove M&A investment activity in the first half of 2018. Although European M&A got off to a slower start in the first half of the year compared to 2017, dealmaking in the UK was healthy in the mega-deal (over $5 billion) space considering the forecasted negative effects of Brexit. Additionally, M&A within the financial services sector did not see the same boost in activity due to a new breed of competitors and increasingly onerous regulations.
“The M&A market is inexorably linked with business sentiment, corporate fundamentals and macroeconomic forces,” said Wylie Fernyhough, analyst at PitchBook. “With all these indicators continuing to trend positively, the global M&A boom shows no signs of stopping and the announced deals should ensure M&A activity continues to flourish throughout the rest of the year.”
Macro M&A Activity
- North America and Europe saw 4,735 deals completed in Q2 totaling $987.8 billion – down 2% and up 24% respectively compared to $799.7 billion across 4,823 deals reported in 1Q 2018.
- 31 mega-deals were completed in 1H 2018, boosting overall deal value despite a plateau in deal count. Vodafone’s $21.8 billion (€18.4 billion) acquisition of UPC Czech was one of five deals above $10 billion closed in 2Q leading to a rise in average deal value.
- A longer-term, subtle shift is underway in global interest rates; with rates rising in North Americabut pushed off another year in the Euro Zone, companies may be pushing through acquisitions today in order to secure more attractive financing before a rise in interest rates makes a deal uneconomical.
- Europe M&A transaction volume and value got off to a slow start in 1H 2018, with 3,424 completed deals totaling $569.7 billion, compared to 5,336 deals valued at $797.8 billionachieved in the same timeframe last year. Dealmaking was healthy as the forecasted negative effects of Brexit have not taken effect with regards to corporate acquisitions.
- European activity paled in comparison to North America, though European buyers participated in two of North America’s largest transactions in the first half of the year – Bayer’s $63 billionacquisition of Monsanto and Sanofi’s $11.6 billion acquisition of Bioverativ Therapeutics.
- 13 mega-deals closed in 2018, five of which were in the UK. This acceleration of mega-deals – also extends to announced deals, such as Takeda’s bid for Shire worth $62 billion (£45.3 billion) and the current bidding war between Fox and Comcast for Sky valued at $34 billion (£26 billion) – gave light to the strong UK market which offers a competitive advantage with deep capital markets and talent pools.
- The financial services sector also saw a slow start to dealmaking the first half of the year with 790 deals closed totaling $161.5 billion compared to $227.6 billion closed in 1H 2017.
- Despite a lack of closed mega-deals in financial services the past three quarters compared to 11 in the three quarters preceding that period, the sector saw a couple of notable transactions in Q2 such as the $3.0 billion (C$3.8 billion) Pure Industrial acquisition by Blackstone and Ivanhoé Cambridge.
- Private markets continued maturation and growth has led the asset class to be viewed as an integral part of a diversified portfolio and many institutional investors continue to increase their target allocations –ODDO BHF’s $2.1 billion acquisition of PE firm ACG Capital in Q2 is an example of a traditional manager expanding private market offerings.
Additional coverage in this report includes:
- Key takeaways
- Deals by region & size
- Spotlight: Financial services
- Spotlight: European M&A
Download the full report here.
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