M&A DEVELOPMENTS IN THE FIRST HALF OF 2017 NORTH AMERICA & EUROPE

Transcription

1 M&A DEVELOPMENTS IN THE FIRST HALF OF 217 NORTH AMERICA & EUROPE

2 INTRODUCTION What happened in the first half of 217 in M&A after the announcement of Brexit and the election of President Trump in 216 and elections in the Netherlands and France this year? The following paper summarizes key developments in the North American and European M&A landscape. Key findings for the first half of 217: Overall M&A activity slowed down in North America and Europe. Cross-border M&A between North America and Europe is on the rise. The IT sector becomes more popular it is especially targeted by PE firms. PE activity grew and makes up a larger part in total M&A activity. OVERALL M&A OVERVIEW M&A activity has decreased in the first half of 217. In North America and Europe, 8,982 transactions with a deal value of $91.6 billion were completed in the first half of the year, which is equivalent to a more than 2% YoY decrease for both deal count and deal value. In the United States, in Q1, the drop in deal count was the largest since 29. A possible reason for the cut back in the number of deals could be the political anxiety over unpredictable actions by the US government. Furthermore, in Q1, China s bids for US companies fell sharply, which could be a result of the Chinese government s crackdown on capital leaving the country. Reasons for the dip in deal count and deal value in Europe could be the political uncertainty throughout the continent. The start of Brexit negotiations and upcoming selections in France and Germany might have negatively influenced inbound investments. M&A activity in North America & Europe $2.5, 3. $2., $1.5, $1., $5, $ $1.19 $1.219 $1.328 $1.779 $2.27 $2.299 $ * Deal Value ($B) Deal Count

3 North American M&A European M&A $1.8, $1.6, $1.4, $1.2, $1., $8, $6, $4, $2, $8, $7, $6, $5, $4, $3, $2, $1, North America Deal Value ($B) Europe Deal Value ($B) North America Deal Count Europe Deal Count CROSS-BORDER M&A: NORTH AMERICA AND EUROPE Even though overall M&A activity in North America and Europe has been slower, cross-border transactions in terms of numbers and value have increased. In the first half of this year, in Europe, 9.8% of deal flow involved a North American acquirer - risen from 8.5% in 216. European investors are also investing more in North America; however, to a lesser extent. In the first half of 217, 6.8% of North American deals were completed by European companies, up from 5.7% in 216. In terms of value, crossborder M&A reaches new heights. In Europe, North American companies completed $67.1 billion in transaction value in the first half of 217, which is a 34% YoY increase. In North America, European firms completed transactions with a value of $ billion in the same period. Thus, European firms are on pace to beat last year s total by 94%. M&A activity in Europe with North-American based acquirer M&A activity in North America with Europe-based acquirer $12, 12% $25, 8% $1, $8, 1% 8% $2, $15, 7% 6% 5% $6, 6% 4% $4, $2, 4% 2% $1, $5, 3% 2% 1% * % * % Deal Flow ($B) % of Total M&A Deals Deal Flow ($B) % of Total M&A Deals

4 INDUSTRY BREAKDOWN In the United States, the Energy, Mining & Utilities sector was the most targeted in the first quarter of this year with $85.3 billion in deal value, closely followed by the Consumer sector with $85 billion. Compared to Q1 216, when the Consumer sector saw deals with a value of $13.3 billion, it also jumped by 539.6% in value. In the first quarter of 217, the sector Industrials & Chemicals was with 28 announced transactions the most targeted industry by deal count in Europe. As a result of the $29.6 billion acquisition of Actelion by Johnson & Johnson, the pharma, Medical & Biotech sector has been the most targeted by value at $38.5 billion. United States Europe Source: MergerMarket. Source: MergerMarket. In the first half of 217, IT companies have become a more prominent part of global M&A accounting for 18.6% of all transactions taking place between January and July 217. Compared to that, in the same period in 216, IT deals accounted for 15.9%. Even though technology-focused companies are involved in a larger portion of activity in terms of deal count, a smaller percentage comes from this sector in terms of deal value. In the first half of the year, 11.6% of the completed transaction value fall into the IT sector, compared to 2.8% last year. The main reason is that so far no mega-deals have taken place in this industry whereas in 216 this could be witnessed. M&A Activity in the IT Sector $6, $5, $4, $3, $2, $1, $ $19 $177 $155 $327 $225 $256 $ * Deal Value ($B) Deal Count

5 Number of deals Deal value in mil USD PRIVATE EQUITY ON THE RISE Private Equity now makes up a larger part of total M&A activity since PE driven acquisitions have grown from 24.7% of all transactions in the first quarter to 29.8% in the second quarter of 217. In the current M&A landscape, prices are high and the economic outlook is rather uncertain. Strategic acquirers can wait for the right opportunity until there is more clarity in the market and prices are decreasing. In contrast to that, PE firms continue to raise funds and must deploy capital. Therefore, it can be expected that the share of PE driven acquisitions will further increase. In July 217, global PE investments reached 527 deals worth a combined $57billion, a 4% decrease in volume and an 8% increase in value compared to the previous month. The July deal value was one of the highest of the past 12 months after April when $66 billion-worth deals were announced. Global PE Deals by Volume and Value July July jul-16 aug-16 sep-16 oct-16 nov-16 dec-16 jan-17 feb-17 mar-17 apr-17 may-17 jun-17 jul-17 Axis Title Number of deals Total deal value (mil USD) Source: M&A Review Global Private Equity July 217, Bureau van Dijk. With 153 deals announced in the United States in July 217, this is by far the most targeted country, followed by China (63 deals), the UK (47 deals), France (42 deals) and India (29 deals). By volume, The United States are also the most targeted country with almost $15 billion of reported PE deals in July 217. PE Market in the United States and Europe With an estimated 21.8 billion of deal value over 1,29 deals in Europe in the first half of 217, deal volume is down 23% compared to 216 (when it continues at the current pace) but deal value will be nearly even. With fewer deals but greater capital flows, the median European PE deal size increased to 29.3 million. Despite greater deal size, median EBITDA multiples fell to 8.3x in the first half of 217. Compared to that, in 216, companies were almost 1x more expensive with a median EBITDA multiple of 9.2x. It can be observed that IT companies are increasingly targeted. They account for 21% of the completed PE deals in Europe. PE companies look for companies with high growth potential and higher margins. Even though US PE deal flow is slightly below last year s pace, it held steady in the first half of 217. In the United States, deals with a value of $275 billion were completed until the end of June. The median EBITDA multiple slightly decreased from 1.7x in 216 to 1.5x in the first half of 217. As well as in Europe, the IT sector is popular in the US, accounting for 19% of PE deals through June 217.

6 ABOUT EURODEV M&A EuroDev M&A, with offices in the Netherlands and France, specializes in European acquisition searches for US based Private Equity Groups and corporations. It is part of the EuroDev Group, a Business Development Group providing its US clients with integrated services to develop and expand their operations in Europe. Services include sales outsourcing, recruitment, HR advisory and M&A advisory. CONTACT GERBEN GROOTHUIS Managing Director EuroDev M&A g.groothuis@eurodev.com EURODEV BV Windmolen NN Almelo The Netherlands DIRK-JAN VORGERS Managing Director EuroDev M&A d.vorgers@eurodev.com EURODEV SARL 473 Route des Dolines 656 Sophia Antipolis France SOURCES Bureau van Dijk, 217. M&A Review - Global Private Equity, July 217, s.l.: Bureau van Dijk. MergerMarket, 217. Global and regional M&A: Q1 217, s.l.: MergerMarket. PitchBook Data, Inc., 217. PitchBooj 2Q 217 European PE Breakdown, s.l.: PitchBook Data, Inc.. PitchBook Data, Inc., 217. PitchBook 2Q 217 US PE Breakdown, s.l.: PitchBook Data, Inc.. PitchBook Data, Inc., 217. PitchBook 2Q 217 US PE Middle Market Report, s.l.: PitchBook Data, Inc.. PitchBook Data, Inc, 217. PitchBook 2Q 217 M&A Report, s.l.: PitchBook Data, Inc.