2016 M&A Round Up – IJanuary 7, 2017
by Reshma Krishnan.
2016 was a good year, but the glory days are clearly behind us.
‘Remember 2016?’ is going to be a sentence uttered by many in years to come. It was a watershed year for many reasons. There was the UK’s Brexit vote which led to the pound falling significantly in early hours as well as large number of failed deals, and finally, of course, the rise and rise of Donald Trump who assumes the office of the President of the United States on the 20th of this month. It was however a record year for Indian M&A even if Investment Banking fees both globally, and here in India, has witnessed quite a dip.
Global Performance dips after three consecutive year-on-year increases
2016 saw a fall in Global M&A total deal value to $3.84 trillion, a significant drop from the 2015 annual record high of $4.66 trillion. AT&T’s $107.9bn bid for Time Warner – announced in October 2016, was the largest deal of the year, which of course led to October becoming the biggest month on record in terms of value for global M&A with $600.8bn. Volume also fell in tandem with an 18% year-on-year decline. Cross-border M&A was also down 3% globally year-on-year, but China outbound volume hit a record high at $225.4bn, as did US inbound M&A at $486.3 billion. But another standout feature of 2016 was how many deals failed- almost 570 billion, the largest number since the 2008 crisis. This was primarily driven by a increasingly strict regulatory environment, which lead to the breaking down of the $160 billion Pfizer –Allergan deal. Winners curse and buyer-seller disconnect were other reasons cited for M&A failures, showing that companies are rethinking how much they are willing to pay for assets.
Technology led the way for the second year in a row.
Clocking in $612.9bn in deal value, 2016 was hot on the heels of previous year but didn’t quite manage to catch up to the 2015 record of $691.6bn. The $ 47bn Qualcomm –NXP Semi conductor deal was not only among the largest deals of the year, but the largest ever deal in the chip industry. At a decent second came Softbank’s acquisition of ARM holdings at $31.6 billion followed by Microsoft acquisition of Linked In at $26.2 billion, which came in third and was the largest acquisition in social media platform. An interesting outcome of the top eleven deals of the year showed that while the two largest, in terms of value, belonged to actual hardware technology, seven out of the eleven were software services including Quintiles Transactions buying IMS Health and Oracle buying Netsuite. Bankers expect this trend of convergence to continue in 2017 as large firms hanker after AI, Security, Big Data and Cloud technologies to expand their reach.