U.S. market prevails as megadeals dominate M&A in 2018

Allen & Overy’s latest M&A Insights report reveals that megadeals powered the global M&A market in Q4 2018, with the number of deals worth in excess of USD10 billion increasing by 120% compared with the same period in 2017. Deals with a value of over USD5 billion are also at their highest level for over a decade, reflecting the increasing boardroom appetite for large, strategic deals.

The report, compiled with data provided by Refinitiv (formerly the Thomson Reuters Financial and Risk Business) highlights sustained corporate confidence, with global deal values in the year to date up by 32% on 2017 and cross-border activity driving this with international deal value at a 10-year high.

Commenting on the report findings, global co-head of Corporate at A&O Dirk Meeus comments:

Continued boardroom confidence in the context of global market volatility flies in the face of the accepted wisdom that M&A likes certainty. This era of disruption offers new opportunities, with gaining access to transformational technologies a powerful motivation to do deals across almost every sector, particularly bringing TMT and life sciences deals to the fore, as the report highlights.

There are further tests ahead in 2019 as the global risk landscape broadens, with the rise of protectionism, political risks and change of law factors such as Brexit. While one of these alone may not be enough to topple the M&A market, it will be a significant test of nerves for all players.

2018 has also seen the reassertion of the U.S. as the fastest growing transactions market for global M&A, with deal values soaring by 57% in the first 11 months of the year and accounting for 44% of all global M&A activity in the year to date. It proved to be the world’s busiest launch pad for outbound deals and is attracting more inbound investment than any other market, despite a 92% decrease in Chinese investment in the U.S. in the first half of the year due to stricter Chinese and U.S. controls.

Western Europe performed strongly once again, with a 40% deal value increase compared to a year ago. Within this, Germany is one of the leading markets for private equity investment, with deal values up by over 32% in the year to date. Private equity partner Nils Koffka comments: “As Europe’s most stable economy, Germany is increasingly portrayed as a “safe haven” for investment, a title that has gained currency in the light of developments such as Brexit. The slight drop in deal volumes we have seen betrays the surplus of cash chasing a relative shortage of assets.”

Looking at sectors, large life sciences deals dominate, with an 80% surge in the value of transactions in the sector. 36% of this rise can be attributed to two giant transactions, that of Takeda’s USD77 billion takeover of Shire and the USD69 billion acquisition of Express Scripts by U.S. health insurer Cigna. Similarly, TMT M&A globally has seen a spate of huge deals has seen deal values up by 81%, with volumes flat.

The M&A Insights Report Q4 also includes analyses of the Indian and CEE M&A markets in 2018. Read the full report here

Related : Allen & Overy (Belgium) LLP

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