Trends in mergers and acquisitions for 2016, 2017

A summary of last year’s merger and acquisition activity was recently published in WilmerHale’s 2017 M&A Report.[1] The Report provides helpful insight into the structure of public and private M&A deals and collects information on various data pieces that help attorneys and other stakeholders understand where the M&A sector is trending. Here are the highlights:

The Numbers In 2016, 11,968 M&A deals with an average deal size of $155.3 million were reported in the United States. This is a decrease from 2015 numbers in both volume and value for domestic companies. These domestic numbers do not correlate to those in the international community, however. For instance, the number of reported M&A transactions decreased worldwide by 2%, with the United States registering a deeper decline of 9%. Deal size was down 14% worldwide, but up by less than 1% in the United States.

The Sectors The domestic telecommunications sector saw the only increase in number of domestic deals – 294 deals were completed in 2016 as compared to 282 in 2015, a 4% increase. Meanwhile, the technology sector took the biggest hit – domestic deals were down 17% from 2,768 deals in 2015 to 2,296 deals in 2016. Notwithstanding, 2016 was the biggest year technology M&A’s have had since 2000 globally. Life sciences and financial services businesses were somewhere in the middle. The life sciences sector M&A deals were down 6% from 621 deals in 2015 to 582 in 2016. Financial businesses saw a larger domestic decrease – 9% from 548 deals in 2015 to 498 deals in 2016. The average deal size for technology and life sciences domestic M&A’s increased 26% and 14%, respectively. Deal sizes in the telecommunications and financial services sector were the outliers – the deal size of domestic telecommunications deals more than tripled, while the value of domestic financial deals decreased 37%.

The Outlook The M&A market in 2017 is expected to remain sound and steady. The market is affected by overall macroeconomic conditions, such as the decrease in the U.S. economy at the end of 2016 and the increase in interest rates by the Federal Reserve in December 2016 and March 2017. With some market players speculating that stock prices hit their peak for the year in the first quarter, buyers’ fear of overpaying and sellers’ hesitancy to accept over-valued stock as consideration could halt some deals. On the flip side, private equity firms are sitting on record capital levels and entered 2017 prepared to make deals.

For more information on mergers and acquisitions, contact Laura Wasson.