Following a contraction in December and January, broader M&A activity showed signs of recovery in February 2016. While the overall number of announced deals was down, volume and average deal values generally increased. In the U.S., number of deals decreased by 2.5% to 831, average deal size increased by 10.7% to $293.0 million and overall deal volume increased by 23.7% to $100.50 billion. Globally, number of deals decreased by 9.7% to 2,890, average deal size increased by 75% to $213.5 million and overall deal volume increased by 60.8% to $310.25 billion.
February's gains were aided by a sharp increase in sponsor-related activity, with the U.S. volume for such deals increasing by 99.6% to $33.82 billion and global volume for such deals increasing by 91.5% to $64.47 billion. In contrast, U.S. strategic activity only marginally increased by 3.7% to $66.68 billion although global volume increased by a solid 54.3% to $245.77 billion. Figure 1.
Crossborder activity followed a similar trend of increasing in terms of dollar value while moderately decreasing in terms of number of deals. Inbound U.S. crossborder volume increased by 30.8% to $28.65 billion (with number of deals decreasing by 7.8% to 130); outbound U.S. crossborder volume increased by 98.0% to $23.88 billion (with the number of deals decreasing by 10.3% to 131); and global crossborder volume rose by 149.4% to $158.50 billion (with number of deals decreasing by 8.8% to 728). Figure 1. Canada regained its top position for both number of deals and volume of inbound U.S. crossborder transactions in February 2016 with 30 transactions and $15.26 billion in volume. Sweden took the lead for outbound U.S. crossborder in terms of volume with $9.92 billion, while Canada maintained its lead in terms of number of deals (25). Figure 3.
Utility & Energy claimed the top spot in the U.S. active target industries list with $20.81 billion in volume in February 2016, followed by Computers & Electronics at $20.47 billion. Figure 2.
Turning to the U.S. public merger market, the average value of announced deals declined for a second month in a row (the first time this has happened since August 2015). Figure 6. We also note that the largest five such deals announced in February were valued at an average of $5.76 billion, which is only 10.5% of the largest five deals announced in the last 12 months ($54.9 billion). Figure 5. As a possible reflection of this decline in average deal size, reverse break fees also declined somewhat in February, from the 12-month average of 5.4% to 4.8%. The use of tender offers in U.S public mergers continued to decline in February 2016, with no tender offers being reported for the second consecutive month (the first time this has occurred since the inception of this publication in April 2012). Figure 11. In addition, no hostile offers were reported in February. Figure 12. Finally, the use of cash-only consideration increased to 78.6% in February 2016, substantially higher than the January 2016 figure (12.5%) and the average for the last 12 months (53.4%). Figure 9.
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