The Merrill Corporation recently released its monthly update of mergers and acquisition (M&A) activity through the first eight months of 2016. The report provides an interesting view of where business has been and where it might be heading. On the whole, the overarching theme through the first eight months is one of lukewarm growth – not recessionary, but not really expansionary either.
Global M&A
Through August, global M&A activity is down about 27 percent compared to the incredibly strong 2015 activity of about $2.5 trillion. In terms of number of deals, M&A activity is down 1,331 deals in 2016 compared to the same period of 2015.
Source: Merrill Corporation
Private Equity Deals
A similar picture shows up when looking at global private equity trend over the past few years. The total dollar value of private equity deals peaked in 2014, and stayed close to that peak in 2015. Through the first eight months of 2016, it looks like 2016 will see a fairly healthy drop in activity. This is true for buyout values, exit values, buyout volume, and exit volume.
Source: Merrill Corporation
Where is Dealmaking Happening?
The picture painted by the trends in global M&A activity begs the question – where is M&A happening? Here are Merrill Corporation’s results.
Overall, just over half of total global M&A activity is in North America. The leading sector for deals during August in North America has been Pharma, Medical, and Biotech at about $19.5 billion (31 deals), an increase of about 126 percent compared to the same month last year. The top financial adviser in the past month was JP Morgan, capturing 25 deals worth about $44 billion, compared to 14 deals worth about $44 billion in August 2015. Behind JP Morgan’s lead in the past month were Evercore Partners (about $23 billion), Centerview Partners (about $19 billion), Goldman Sachs (about $19 billion), and Morgan Stanley (about $18 billion).
Coming in second was non-Japan Asia at about 30 percent. Leading the group of advisers was Kotak Investment Banking at about $12 billion, followed by JM Financial at about $10 billion, DSP Merrill Lynch at about $8 billion, Citi at about $6 billion, and EY at about $4 billion.
The geographic area with the third most deals was Europe at about 10 percent. The industry leading the way in August was Industrials and Chemicals, with 62 deals valued at about $7 billion. That’s an increase of 30 percent (on value) compared to the 98 deals and $5 billion in value that occurred in August 2015. The firm leading the way behind the M&A activity was Goldman Sachs at about $7 billion, followed by Citi at approximately $4 billion, BNP Paribas around $4 billion, Morgan Stanley in the area of $4 billion, and JP Morgan at about $3 billion.
Source: Merrill Corporation
Conclusion
Overall, although not recessionary, global M&A activity in 2016 is much weaker than the red-hot 2015. In terms of where M&A activity is happening, just over half of all global M&A activity through the first eight months of 2016 occurred in North America, with just short of 4,000 deals. In second place was non-Japan Asia at about 30 percent, followed by Europe at about 10 percent. In all, activity is cooling off, but still moving ahead at a pace consistent with moderate economic growth.
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