July 2018, Issue 76. Strategic vs. Sponsor Activity. Crossborder Activity. U.S. Deals by Industry. U.S. Public Mergers

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1 July 2018, Issue 76 M&A activity in weakened from last month across most measures, although still generally strong for the first half of the year. The total number of deals decreased in the U.S. by 28.6% to 528 (the lowest level since the beginning of this publication in 2012) and globally by 17.5% to 2,457 (the lowest level since March 2014). However, while June deal volume by dollar value also decreased globally by 14.0% to $ billion, deal volume increased in the U.S. by 27.6% to $ billion. 1 Strategic vs. Sponsor Activity The number of strategic deals decreased by 33.0% to 410 in the U.S. and by 18.6% to 2,162 globally, each the lowest respective level in the last 12-month period. However, while global strategic volume by dollar value also decreased by 17.1% to $ billion, U.S. strategic volume by dollar value increased by 41.7% to $ billion. Figure 1 and Annex Figures 1A 4A. The number of sponsorrelated deals decreased by 7.1% to 118 in the U.S. and by 8.1% to 295 globally, each the lowest respective level in the last 12-month period. Sponsor-related volume decreased by 4.8% to $41.61 billion in the U.S. and by 4.0% to $91.57 billion globally. Figure 1 and Annex Figures 1A 4A. Crossborder Activity The number of deals decreased in for both U.S. inbound transactions (by 29.7% to a 12-month low of 78) and outbound transactions (by 6.4% to 117). U.S. inbound volume by dollar value decreased by 74.2% to a 12-month low of $7.40 billion and U.S. outbound volume by dollar value decreased by 63.6% to $11.49 billion. Figure 1 and Annex Figures 5A 7A. Globally, the number of crossborder deals decreased by 13.8% to 604, the lowest level in the last 12-month period. Global crossborder deal volume by dollar value decreased by 60.7% to $68.77 billion. remained the leader for U.S. inbound activity by number of deals in both the month of June (14) and over the last 12-month period (363). Switzerland was the leading country for U.S. inbound activity as measured by deal volume by dollar value in June ($2.43 billion), while retained its lead over the last 12-month period ($77.05 billion). The U.K. was the leading destination country by deal number in June (32) and over the last 12-month period (297). Sweden was the leading destination country for U.S. outbound activity by dollar value ($2.36 billion), while the U.K. remained the leader over the last 12-month period ($ billion). Figure 3. U.S. Deals by Industry Computer & Electronics remained the most active target industry by number of deals in June (183) and over the last 12-month period (2,771). Telecommunications was the most active target industry by dollar value in June ($82.14 billion), while healthcare remained the most active target industry over the last 12-month period ($ billion). Figure 2. U.S. Public Mergers As for U.S. public merger deal terms in, average target break fees (4.0%) increased above the 12-month average (3.6%) and average reverse break fees (6.0%) were near the 12-month average (5.9%). Figures 6 and 7. One transaction in June involving a financial buyer included a go-shop provision Figure 8. The use of cash consideration in June decreased to 50.0%, below the 12-month average of 55.9% Figure 9. Notably, there were no tender offers for U.S. public mergers or hostile/unsolicited offers in June, compared with 12-month averages of 16.2% and 13.0%, respectively. Figure 11 and Figure Each metric in this publication that references deal volume by dollar value is calculated from the subset of the total number of deals that include a disclosed deal value. PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 1

2 M&A Activity Figure 1 Figure 2 Most Active U.S. Target Industries 2 Global +/- From U.S. +/- From Prior Prior Month Month Total Volume (US$B) (56.97) No. of deals 2,457 (521) 528 (211) Avg. value of deals (US$mil) Strategic Transactions Volume (US$B) (53.16) No. of deals 2,162 (495) 410 (202) Last 12 Months Avg. value of deals (US$mil) (10.7) Telecommunications Computers & Electronics Healthcare Real Estate/Property Food & Beverage $25.19 $19.45 $13.04 $10.89 $82.14 $100 $200 $300 $400 Sponsor-Related Transactions Volume (US$B) (3.81) (2.12) No. of deals 295 (26) 118 (9) Avg. value of deals (US$mil) , Healthcare Telecommunications Computers & Electronics Oil & Gas Real Estate/Property $ $ $ $ $ Crossborder Transactions 1 Volume (US$B) (106.30) Inbound No. of deals 604 (97) Inbound Avg. value of deals (US$mil) (254.3) Inbound Inbound (21.23) (20.10) Inbound (33) (8) Inbound (209.3) (396.7) $100 $200 $300 $400 Computers & Electronics 183 Professional Services 51 Healthcare 48 Finance 36 Real Estate/Property ,000 1,500 2,000 2,500 3,000 Last 12 Months Figures 1-3 were compiled using data from Dealogic, and are for the broader M&A market, including mergers of any value involving public and/or private entities. Deal volume by dollar value and average value of deals are calculated from the subset of the total number of deals that include a disclosed deal value. Figures 4 and 5 were compiled using data from FactSet MergerMetrics, and are limited to mergers involving public U.S. targets announced during the period indicated and valued at $100 million or higher regardless of whether a definitive merger agreement was reached and filed or withdrawn. All data is as of July 10, 2018 unless otherwise specified. Last 12 Months data is for the period from July 2017 to inclusive. Data obtained from Dealogic and FactSet MergerMetrics has not been reviewed for accuracy by Paul, Weiss. Computers & Electronics 2,771 Professional Services 1,084 Healthcare 960 Finance 540 Construction/Building ,000 1,500 2,000 2,500 3,000 1 Global crossborder transactions are those where the acquirer and the target have different nationalities. Nationality is based on where a company has either its headquarters or a majority of its operations. U.S. crossborder transactions are those transactions where the acquirer and the target have different nationalities and either the acquirer ( ) or the target ( Inbound ) has a U.S. nationality. 2 Industries categories are determined and named by Dealogic. PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 2

3 M&A Activity (Continued) Return to Summary Figure 3 Top 5 Countries of Origin or Destination for U.S. Crossborder Transactions Inbound U.S. Crossborder Transactions for Inbound U.S. Crossborder Transactions for the Last 12 Months Switzerland $2.43 $77.05 $1.15 France $37.99 China.96 Japan $34.96 Japan.89 Switzerland $21.92 Austria.84 $17.67 $30 $60 $90 $120 $150 $30 $60 $90 $120 $ Japan 10 Japan 175 China China 95 France, the Netherlands and Switzerland³ France U.S. Crossborder Transactions for U.S. Crossborder Transactions for the Last 12 Months Sweden $2.36 $ Bermuda $1.99 India $18.68 France $1.63 Israel $15.00 Monaco $1.55 $12.07 Australia.69 Germany $11.65 $30 $60 $90 $120 $150 $30 $60 $90 $120 $ Australia and Germany⁴ 8 Australia and Germany⁵ 87 France 7 India Each of France, the Netherlands and Switzerland was the country of origin for four transactions in. 4 Each of and Germany was the country of destination for eight transactions in. 5 Each of Australia and Germany was the country of destination for 87 transactions over the last 12 months. PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 3

4 M&A Activity (Continued) Figure 4 Average Value of Announced U.S. Public Mergers (in US$mil) $35,000 $30,000 $29,419.0 $29,336.3 $25,000 $20,000 $15,000 $11,599.8 $11,027.8 $16,664.3 $13,992.0 $16,683.0 $10,000 $5,000 $5,388.5 $4,819.3 $7,383.1 $8,020.2 $1,672.8 $1,762.4 $3,565.4 $3,194.5 $9,146.6 $4,030.7 $3,908.7 $1,389.1 $5,905.2 $4,514.4 $4,713.2 $5,201.2 $2,016.8 Average Value of Five Largest U.S. Public Mergers Average Value of U.S. Public Mergers Figure 5 Five Largest U.S. Public Mergers Equity Value (US$B) Pinnacle Foods Inc. ~ Conagra Brands, Inc. $8.10 (June 27, 2018) Envision Healthcare Corp. ~ KKR & Co. LP $5.58 (June 11, 2018) Cotiviti Holdings, Inc. ~ Verscend Technologies, Inc. $4.17 (June 19, 2018) Education Realty Trust, Inc. ~ Greystar Real Estate s LLC $3.34 (June 25, 2018) Convergys Corp. ~ SYNNEX Corp. $2.38 (June 28, 2018) $20 $40 $60 $80 $100 $120 $140 Last 12 Months Equity Value (US$B) QUALCOMM, Inc. ~ Broadcom Ltd. $ (November 6, 2017) (Offer withdrawn March 14, 2018) Twenty-First Century Fox, Inc. ~ The Walt Disney Company $70.40 (December 14, 2017) Aetna, Inc. ~ CVS Health Corp. $68.02 (December 3, 2017) Twenty-First Century Fox, Inc. ~ Comcast Corp. $64.84 (May 23, 2018) Express Scripts Holding Co. ~ Cigna Corp. $53.94 (March 8, 2018) $20 $40 $60 $80 $100 $120 $140 PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 4

5 M&A Terms Figure 6 Average Break Fees as % of Equity Value 6 (US$mil) 12% $15, % 6% 6.8% 7.1% 6.1% 4.6% 4.6% 3.4% 3.4% 3.3% 3.4% 3.2% $12, % 4.5% 5.2% 3.4% 4.6% $5, % 4.0% 6.6% 3.4% 6.0% 4.0% $10,000 $5,000 $3, % $4, % $4,895.2 $2, % $1,672.8 $1,762.4 $1,292.7 $2,261.9 $1,721.5 $2,172.3 Target Break Fee Reverse Break Fee Average Value of U.S. Public Mergers (in US$mil) Figure 7 Average Break Fees as % of Equity Value Figure 8 U.S. Public Merger Go-Shop Provisions Last 12 Months Last 12 Months Target Break Fee for All Mergers % of Mergers with Go-Shops Last 12 Months Reverse Break Fee for All Mergers % of Mergers Involving Financial Buyers with Go-Shops 8 % of Mergers Involving Strategic Buyers with Go-Shops Reverse Break Fee for Mergers Involving Financial Buyers Avg. Go-Shop Window (in Days) for All Mergers with Go-Shops Reverse Break Fee for Mergers Involving Strategic Buyers Avg. Go-Shop Window (in Days) for Mergers Involving Financial Buyers with Go-Shops Figures 6-12 were compiled using data from FactSet MergerMetrics, and are limited to select mergers involving public U.S. targets announced during the period indicated, valued at $100 million or higher and for which a definitive merger agreement was reached and filed (unless otherwise indicated). Data obtained from FactSet MergerMetrics has not been reviewed for accuracy by Paul, Weiss. Avg. Go-Shop Window (in Days) for Mergers Involving Strategic Buyers with Go-Shops 11 N/A Based on the highest target break fees and reverse break fees payable in a particular deal. 7 Two transactions in involving a financial buyer had a reverse break fee. 8 Two transactions in involved a financial buyer. 9 One transaction in had a go-shop provision. 10 One transaction in involving a financial buyer had a go-shop provision. 11 No transactions in involving a strategic buyer had a go-shop provision. PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 5

6 M&A Terms (Continued) Return to Summary Figure 9 Form of Consideration as % of U.S. Public Mergers 12 Figure 10 % of Partial and All Stock Deals That Have a Fixed Exchange Ratio % Last 12 Months % 21.4% Cash Only Figure 11 Tender Offers as % of U.S. Public Mergers 7.1% Stock Only 0.0 Last 12 Months % 55.9% 14.5% Cash & Stock Only Choice (Cash Election) Other Figure 12 Hostile/Unsolicited Offers as % of U.S. Public Mergers Last 12 Months % Last 12 Months 12 Due to rounding, percentages may not add up to 100%. 13 This data includes both announced transactions for which a definitive merger agreement was reached and filed and those for which a definitive merger agreement was never reached and filed (including withdrawn transactions). Paul, Weiss is a leading law firm serving the largest publicly and privately held corporations and financial institutions in the United States and throughout the world. Our firm is widely recognized for achieving an unparalleled record of success for our clients, both in their bet-the-company litigations and their most critical strategic transactions. We are keenly aware of the extraordinary challenges and opportunities facing national and global economies and are committed to serving our clients short- and long-term goals. Our Mergers & Acquisitions Practice Our M&A Group is among the most experienced and active in the world. We represent publicly traded and privately held companies, leading private equity firms, financial advisors, and other financial institutions and investors in their most important mergers and acquisitions, joint ventures and other strategic transactions. Our expertise advising corporations and private investors in a broad range of sophisticated transactions enables us to identify new opportunities for our clients to realize value. We have particular experience in guiding clients as they engage in proxy battles, company-altering and market consolidating transactions or capital markets transactions. Recent highlights include advising: ILG in its approximately $4.7 billion sale to Marriott Vacations Worldwide; CSRA in its $9.7 billion acquisition by General Dynamics; Bioverativ in its $11.6 billion acquisition by Sanofi; ADP in its successful proxy contest against Pershing Square; Qualcomm in connection with a $130 billion unsolicited offer from Broadcom; Kate Spade & Company in its $2.4 billion acquisition by Coach; Qualcomm in its approximately $47 billion pending acquisition of NXP Semiconductors; Agrium in its $36 billion merger of equals with Potash Corp. of Saskatchewan; funds affiliated with Apollo Global Management and Protection 1 in their $15 billion acquisition of ADT Corporation and Alere in its $5.3 billion acquisition by Abbott Laboratories. PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 6

7 This publication is not intended to provide legal advice, and no legal or business decision should be based on its content. Questions concerning issues addressed in this memorandum should be directed to: Matthew W. Abbott Scott A. Barshay Angelo Bonvino Ariel J. Deckelbaum Jeffrey D. Marell Taurie M. Zeitzer Counsel Frances Mi and associates Ryan D. Blicher, Logan M. DeSouza, Edy Glozman, Vincent P. Iacono, Paul A. Nolle III, David Okada and Michael N. Wysolmerski contributed to this publication. Our M&A s Matthew W. Abbott Adam M. Givertz Xiaoyu Greg Liu Tarun M. Stewart Edward T. Ackerman Neil Goldman Jeffrey D. Marell Ramy J. Wahbeh Scott A. Barshay Bruce A. Gutenplan Alvaro Membrillera Steven J. Williams Angelo Bonvino Justin G. Hamill Judie Ng Shortell Betty Yap Jeanette K. Chan David M. Klein Kelley D. Parker Kaye N. Yoshino Ellen N. Ching David K. Lakhdhir Carl L. Reisner Tong Yu Ariel J. Deckelbaum Stephen P. Lamb Kenneth M. Schneider Taurie M. Zeitzer Ross A. Fieldston John E. Lange Robert B. Schumer Brian P. Finnegan Brian C. Lavin John M. Scott NEW YORK BEIJING HONG KONG LONDON TOKYO TORONTO WASHINGTON, D.C. WILMINGTON PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP PAULWEISS.COM 2018 Paul, Weiss, Rifkind, Wharton & Garrison LLP. In some jurisdictions, this publication may be considered attorney advertising. Past representations are no guarantee of future outcomes. 7

8 A N N E X M&A Activity 12-Month Trends Figure 1A U.S. Deal Volume (US$B) $300 $ $ $ $200 $ $ $ $100 $95.77 $59.43 $36.34 $ $77.73 $59.08 $93.91 $87.41 $81.39 $46.90 $12.52 $40.51 $ $74.60 $33.40 $42.94 $ $65.28 $ $85.65 $57.12 $28.53 $21.37 $ $31.32 $ $ $ $43.73 $41.61 Strategic Sponsor Total Figure 2A Global Deal Volume (US$B) $600 $ $500 $ $ $ $400 $300 $200 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $100 $95.66 $85.96 $ $69.93 $74.36 $57.83 $87.76 $88.64 $76.14 $61.05 $88.43 $95.38 $91.57 Strategic Sponsor Total PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP A-8

9 A N N E X Figure 3A U.S. Number of Deals 1, Strategic Sponsor Total Figure 4A Global Number of Deals 4,000 3,200 2,400 3,418 3,039 3,304 2,940 3,616 3,225 3,348 2,949 3,065 2,697 2,955 2,627 3,378 2,953 2,798 2,455 3,152 2,767 2,932 2,978 2,598 2,657 2,457 2,162 1, Strategic Sponsor Total PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP A-9

10 A N N E X Figure 5A Inbound U.S. Crossborder Transactions $ $80 $60 $ $20 $19.91 $15.17 $16.29 $13.34 $50.32 $22.75 $39.41 $8.33 $30.73 $17.44 $28.63 $ Figure 6A U.S. Crossborder Transactions $ $80 $60 $ $20 $27.58 $8.08 $15.65 $8.65 $5.50 $13.44 $9.27 $55.16 $17.39 $52.39 $31.59 $ Figure 7A Global Crossborder Transactions $250 $200 $ ,000 $ $50 $ $66.70 $88.99 $60.83 $79.60 $ $82.10 $91.27 $ $ $ $ PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP A-10