2015 set to be best year ever for M&A – first half sees new deal records, with capacity for even further growth

EY LLC, Kyiv, Ukraine, 
Wed, Sep 2, 2015

u  GlobalM&A value up 37% in 2015, as megadeals hit record highs

u  New June recordunderlines momentum in second-highest first half on record

u  Appetiteto acquire at five-year high with further capacity for upward trend in currentM&A cycle

LONDON, KYIV, 2 SEPTEMBER 2015. This year could become the highest on record in termsof global deal value as the resurgence of M&A has further accelerated inthe first half of 2015.

The first sixmonths of 2015 are the second-highest on record at US$2.27t, just behind the all-timehigh first half of US$2.59t in 2007. The 37% increase in deals value globallywas bolstered by the most megadeals in a six-month first half. The 31 deals ofmore than US$10b surpassed the previous record of 27 in the first six months of2006.

The recordscontinue unabated – 2015 seen the highest June onrecord for global deal value – and on current trajectory, the full year shouldchallenge 2007’s record as the best ever year for global M&A.

PipMcCrostie, EY’s Global Vice Chair, Transaction Advisory Services, says:

“M&A as a routeto growth is firmly back on the boardroom agenda. There are two clear driversof activity after half a decade of deal stagnation. Disruptive forces aredriving deal-making at every level. The disruption is triggered by sectorconvergence, technology and changing consumer preferences. In addition,divergent economic conditions are accelerating cross-border M&A.”

Is the hot deal market over-heating?

Thesecond half of 2015 should be as strong as the first with deal-makingintentions running at a five-year high. More than 50% of global executives surveyedfor the Global Confidence Barometer’s 12^th edition areplanning to pursue acquisitions in the next 12 months.

Althoughthe global deal market is running hot, there is evidence to counter claims ofit over-heating. Although M&A value is challenging record highs, there hasbeen no associated increase in the volume of deals during the last M&Acycle. That suggests a high level of discipline in selecting the right deals.Deal multiples are elevated, but not at 2007 levels, while bid-premiums are in linewith midpoints of prior M&A cycles.

McCrostieadds: “Companies are not doing deals for deal’s sake. We are seeing aproliferation of high-value deals, but also an expansion of M&A pipelinesas companies carefully consider their strategic options before making a move. Executivesare expressing increasing confidence in the global economy and this, combinedwith steady confidence in corporate earnings and attractive interest rates, isfostering the conditions for companies to make bold M&A moves.”

Divergent economic and monetary conditions boostcross-border deal-making

Thetotal value of cross-border deals has risen to US$716b, up 48% on the sameperiod in 2014. The top targeted country for cross-border deals was the US(US$184b), closely followed by the UK (US$169b). Switzerland, France and MainlandChina complete the top five targeted nations.

In termsof overall value by country, including domestic deals, the US leads withUS$1.01t (46% of all global M&A). Second most targeted is Mainland China(US$222b), followed by the UK, Hong Kong and France. With South Korea,Australia and Japan, Switzerland and Canada also in the top 10, there is abalanced spread of M&A globally, across North America, Europe and Asia.

Life sciences deal market in rude health

Healthcare is the most active sector in 2015 with US$340b, up 50% on 2014, driven bydemand for new and innovative drugs and therapeutics. Oil and gas has also beenactive, driven by volatility in benchmark crude prices, with deal value morethan doubling (up 136%) to US$264b. Technology (US$247b, up 69%) and telecoms(US$211b, up 13%) remain in play, boosted by increasing sector convergence, drivenby changing customer demands.

Nichegrowth is driving many acquirers. The search for specialization is fosteringdeals – from orphan drugs in life sciences to new materials and technology inindustrials.

“Allsectors are engaging in deal-making in this current market,” concludes McCrostie.“We have seen technology and health care lift deal values in the past fewyears, but we now see increased activity across all industries. Barring a majoreconomic or geopolitical-driven, we can expect high-value deal activity tocontinue through 2015 and beyond.”

Vladyslav Ostapenko, Head of Corporate Finance and M&A group, EYUkraine: «With bank lending being frozen and international capital markets closedfor Ukrainian companies, M&A deals seems to be the only source of financing.Global M&A market activity provides opportunities for Ukrainian companiesand their owners, who want to accelerate their business growth by attractingforeign partners. Certainly, investment activity is hit by the militaryconflict in the Eastern Ukraine. However, we can observe that even a fragilestability encourages some investors to look for investment targets in Ukraine.Thus, we successfully completed three selling transactions of Ukrainian assetsto foreign investors from Denmark, Canada and Bulgaria over the past year. Twoprojects are in final stages, and the number of those in negotiation process iseven bigger. This clearly indicates that with global investment activity it is possibleto find buyers when a deal is properly structured and a seller is well-prepared.”

—ends—

Notesto Editors

About the data

All M&A deal data was extracted from Dealogic and analyzed by EY with inputfrom the Global Capital Confidence Barometer (ey.com/ccb).

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