If M&A activity in 2018 was a complicated story, 2019 was not much simpler. Globally, activity levels were on the decline compared with 2018 levels. While the United States and Latin America saw modest continued growth over 2018 volumes, other regions such as Europe, the Middle East and Africa (EMEA) and the Asia-Pacific registered declines in activity. The total value of announced deals last year was US$3.8 trillion according to Bloomberg, representing a 3.7 per cent decrease from the previous year. Despite the modest decrease in total value, however, 2019 marked the sixth consecutive year in which M&A activity passed US$3 trillion. This high level of M&A activity was sustained despite increased global geopolitical uncertainty, including uncertainty surrounding Brexit; the US–China trade war; the US House of Representatives’ impeachment of Donald Trump; uncertainty with respect to South America, including a migrant crisis and presidential uncertainty, and unrest in Venezuela; and nearly six months of anti-Beijing demonstrations in Hong Kong. Global M&A activity in the first half of 2019 was strong despite a weak fourth quarter in 2018. The market began to slow during the second half of 2019 then decreased markedly during the third quarter when the market contracted slightly, but the fourth quarter ended on a high note.
The number of blockbuster deals remained strong, increasing from five deals announced in 2018 exceeding US$50 billion in value to seven deals in 2019, including Occidental Petroleum’s US$57 billion acquisition of Anadarko, BB&T’s US$66 billion merger with SunTrust, Disney’s US$71.3 billion acquisition of 21st Century Fox, Saudi Aramco’s US$70.4 billion proposed acquisition of 70 per cent of Sabic, AbbVie and Allergan’s US$86.3 billion merger, UTC and Raytheon’s US$88.9 billion merger of equals and Bristol-Myers Squibb’s US$89.5 billion acquisition of Celgene. More generally, high-dollar deals continued to dominate, with 38 deals with announced values in excess of US$10 billion in 2019 – only six fewer than were announced in 2018. As has been the trend in previous years, deals have continued to get larger. In 2019, the deals announced averaged a value of US$389 million, the highest figure since 2015 according to MergerMarket.
Globally, private equity buyouts in 2019 continued to grow, accounting for 27.5 per cent of all 2019 M&A activity, the third successive year above 25 per cent. The total value of private equity deals in 2019 was US$556.4 billion, very close to the US$571 billion in 2018. Bloomberg reported regional increases in private equity M&A activity in 2019 of 2.8 per cent and 11.4 per cent in the American and EMEA markets, respectively and a 16.4 per cent decrease in Asia-Pacific markets. The continued availability of low interest rates and large corporate cash reserves continued to foster positive conditions for private equity M&A activity in 2019.
The top industry in terms of global M&A activity for 2019 remained the financial sector with US$897.9 billion in announced transactions, which accounted for 23.6 per cent of deal value in 2019, followed by consumer non-cyclical (20.4 per cent), industrial (11.6 per cent), communications (9.6 per cent), consumer cyclical (9.5 per cent), technology (8.3 per cent), energy (8.1 per cent), basic materials (6.8 per cent), utilities (2.1 per cent) and diversified (0.1 per cent). Cross-border M&A deals decreased by 0.5 per cent over 2018 volume and reached 22.3 per cent of total M&A value in 2019, representing a 13 per cent decrease compared to cross-border volume in 2018.
By region, the Americas continued to lead the global M&A market in 2019 with US$2.1 trillion in activity from 19,940 announced transactions, representing a 2.1 per cent increase in total volume, as compared with 2018. The United States accounted for 47.2 per cent of the global value, the highest share since 2001, with announced deals worth US$1.794.3 trillion, increases of 4.2 per cent and 0.9 per cent, respectively, from 2018. Of the 20 largest transactions announced in 2019, 15 came from domestic consolidation among US corporations. The top three sectors leading the market in the Americas included consumer non-cyclical, financial and industrial, each of which accounted for 27.3 per cent, 19.9 per cent and 11.6 per cent of the market respectively. Canadian activity saw a notable increase, with the US$132.8 billion in announced volume representing a 14.5 per cent increase over 2018 levels. Latin American 2019 total deal value, however, increased 12.5 per cent compared with 2018, according to MergerMarket.
M&A activity in the Asia-Pacific region posted a notable decline in volume of 11.5 per cent against 2018 totals, dipping to US$845.8 billion and representing the lowest value in over five years. The China and Hong Kong global share fell from 11.4 per cent in 2018 to 8.8 per cent in 2019. Both inbound and outbound deals plummeted to levels unseen in over 10 years. The continued decline in US–China activity was particularly noteworthy, with US inbound activity from China and Hong Kong reaching only US$5.7 billion in 2019, the lowest amount since 2011, and US investment into China and Hong Kong dropping to US$7.7 billion, the lowest value since 2013.
The European M&A market saw deal volume decrease in 2019 with a falling deal count, with volume falling by 11.5 per cent to a total of US$845.8 billion. Only five deals over US$10 billion were announced, which can account for much of the decrease in the region. Europe’s 2019 total share of M&A value fell to 23.1 per cent, the lowest annual figure on record according to MergerMarket. Despite the fall in global share, Europe seemed to be gaining strength in the market in the fourth quarter of 2019. Despite this notable slowdown, private equity activity remained strong in Europe, increasing by 11.4 per cent over 2018, realising a volume of US$339.3 billion.
Despite the promising fourth quarter of 2019, global dealmaking came to a screeching halt in the first quarter of 2020, as the unprecedented outbreak of the covid-19 pandemic put much of the global economy on hold. Global M&A activity in the first quarter of 2020 was down nearly 40 per cent by value compared to the first quarter of 2019. Meanwhile, over the same period, private equity remained at the same level of activity as it did in 2019. It is unlikely that there will be as many deals over US$10 billion as in previous years, with fewer deals reaching this threshold being announced compared with 2018. Cross-border M&A activity has also taken a noticeable downturn in the first quarter of 2020, falling by 27 per cent to a new six-year low according to Refinitiv, which particularly affects emerging markets. We can also expect that mid-market M&A will face downturns as social distancing measures have made in-person meetings and site visits impossible. Many deals have been postponed until the economy stabilises. Others have been delayed owing to a lack of government resources for regulatory approvals. We can expect new fundamental shifts in M&A strategy as dealmakers react to the global economy and the tide turns to a bear market. The impact of the covid-19 pandemic continues to evolve every day and these uncertainties create risks and challenges for which buyers and sellers will need to adjust. As the world economy responds and prepares to reopen and the United States heads towards the 2020 presidential election, M&A professionals should prepare for an unpredictable 2020.
For over 15 years, our predecessor publication, Lexology Getting The Deal Through: Mergers and Acquisitions, and now this title, has sought to provide information of use to practitioners and clients around the world. The pace of the globalisation of the M&A economy has far outstripped what anyone could have predicted. In that time, the global economy has gone through several cycles and suffered cataclysmic reversals and huge booms. We hope throughout that time and for some time to come that this publication has been and will continue to be a resource of great use to those who seek it out.
