Guest post by John Reiss and Gregory Pryor of White & Case LLP
M&A in the last three months of 2019 gave a respectable performance. And while M&A value in 2019 as a whole fell, activity once again topped US$3 trillion in what remains an abundant deal market.
Following a Q3 that had been one of the weakest quarters in three years, the global M&A market staged a comeback in Q4. There was US$767 billion worth of M&A activity registered in the last three months of the year, a 14% quarter-on-quarter uptrend. Volume, however, moved in the opposite direction, the 4,536 deals recorded in Q4 falling short of Q3 by 7%.
As a result, the global value of M&A hit US$3.2 trillion in 2019—down 9% compared to 2018, but above the 2017 total, making 2019 the sixth year in a row in which global M&A topped the US$3 trillion mark.
To boost overall numbers, the fourth quarter claimed one of the ten largest deals of the year: electronic trading broker TD Ameritrade Holding Corp.’s announced purchase by rival The Charles Schwab Corp. for US$29 billion in an all-share deal, which came in towards the bottom of the list at ninth place.
Industrials and chemicals tops Q4
Other such large deals outside of the annual top 10 that accounted for a significant slug of Q4 activity included DuPont Nutrition & Biosciences’ announced acquisition by International Flavors & Fragrances for US$28.2 billion, which coupled with Fiat Chrysler Automobiles’ planned merger with Groupe PSA for US$16.4 billion ensured that the industrials and chemicals (I&C) sector took first place. The sector clocked up US$133.7 billion worth of activity in Q4.
Financial services was a close second with US$125.1 billion in M&A, helped in no small part by the quarter’s aforementioned top deal: TD Ameritrade, which alone accounted for 23% of the sector’s total. Another large deal that helped to secure financial services’ position was the announced acquisition of an undisclosed minority stake in Hengfeng Bank Co. by an investor group led by state-backed China SAFE Investments Ltd. for US$14.3 billion. The transaction enabled SAFE to inject capital into the troubled regional bank.
In spite of the relatively modest performance witnessed in Q4—albeit in the context of a few years of the best-performing M&A market in history—there was a single day that claimed at least US$45.6 billion of value: November 25. On that day, not only was the TD Ameritrade deal announced, but also LVMH Moet Hennessy Louis-Vuitton’s US$16.6 billion tilt for famed jewelry brand Tiffany & Co. was announced.
2019 tops US$3 trillion once again
Altogether, global M&A markets were on a winning streak in 2019, which represented the sixth consecutive year that deals surpassed the US$3 trillion mark. Rising stock markets and a highly liquid financing environment have made conditions ripe for some of the largest transactions ever recorded.
Aggregate deal value reached US$3.2 trillion in the year, down 9% year on year. This dollar amount was invested across 19,365 acquisitions, the second highest annual volume on record after 2018 (21,200).
I&C was not the top sector in 2019, despite claiming the lion’s share of Q4. That distinction goes to TMT. The largest transaction of the year in the sector was Total System Services’s announced takeover by Global Payment for a sizeable US$25.7 billion. CBS Corp.’s planned acquisition of Viacom Inc. for US$19.9 billion and Salesforce.com’s US$15 billion announced acquisition of Tableau Software also helped to push TMT to the top of the table. No less than 16% of the global M&A value pie was accounted for by TMT. We expect the TMT sector to continue driving M&A deal activity in 2020 as the global economy continues to adjust to technological advances and disruption to traditional business models.
The defense sector had by far its best year on record in terms of M&A value, due almost entirely to the largest deal of the year across all sectors, the US$88.9 billion business combination of United Technologies Corp.’s aerospace business, comprising Pratt & Whitney and Collins Aerospace Systems, with Raytheon Company. The transaction, which is pending approval by regulators, will create an aerospace and defense giant, the world’s number three after Boeing and Airbus.
The past few years have been historic ones for M&A. And corporations remain highly acquisitive, as do financial sponsors, who are equipped with significant cash to invest. The Federal Reserve’s interest rate cuts last year, made in a bid to avoid a sag in the US economy amid global trade tensions, have improved what were already highly optimal M&A financing conditions. Q4 may not have broken records, but megadeals remain in vogue and deal volumes remain at historically robust levels. Even though the top of the market may have been passed, 2020 could continue to record another US$3 trillion-plus performance.
John Reiss, Partner, New York
Global Head of White & Case’s Mergers & Acquisitions Group, John has more than 30 years of experience representing parties in virtually all manner of M&A transactions in all industries.
The Global Mergers & Acquisitions Group includes more than 500 lawyers across all the Firm’s offices. In 2016, it was ranked #1 by deal value Globally, according to Mergermarket and Bloomberg’s M&A League Tables. The US National and New York M&A practices were also ranked among the “Elite” law firms by Chambers USA 2016. More…
Gregory Pryor, Partner, New York
Greg is a senior partner in White & Case’s Mergers & Acquisitions and Corporate Practice.
He represents corporations, their stakeholders and financial investors in a wide range of complex domestic and cross-border mergers, acquisitions, divestitures, joint ventures and leveraged buyouts. More…
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