Global M&A Activity In 2015 Worth $4.28 Trillion, Highest Ever

Global mergers and acquisitions were at an all-time high in 2015, with $4.28 trillion worth of deals — 16.6 percent more than the previous peak in 2007 and about 30 percent more than 2014, according to a report by Mergermarket released Thursday. At almost 15 percent, the energy, mining and utilities (EMU) sector had the highest market share by value.

Both the U.S. and Asia recorded their highest M&A values, and two of the only six deals ever valued at over $100 billion were announced in 2015.

The United States, with 4,786 deals worth $1.97 trillion, accounted for 46.2 percent of global M&A activity, its highest share since 2001, and the deal value increased by 40.6 percent compared to 2014. Pfizer’s purchase of Allergan, worth $183.7 billion, was the third-biggest M&A transaction in history. The pharmaceuticals, medical and biotech (PMB) sector also saw other big-ticket deals such as Anthem’s $50.4 billion purchase of Cigna and Aetna’s buyout of Humana, worth $26.6 billion, making it the hottest sector for M&A in the U.S.

EMU was the second-biggest sector in the U.S. in terms of deal value, followed by financial services and technology. The top four sectors together accounted for close to 55 percent of all domestic M&A deals.

Low interest rates and economic growth in the U.S. made cheap debt available to corporations to fund the deals. Tax laws in Ireland and the United Kingdom made those two countries favored outbound targets for U.S. companies, with the former receiving $190.7 billion in 36 deals (including the Pfizer-Allergan deal) and the latter receiving $61.8 billion in 244 deals.

The second- and third-largest deals of the year came from Europe. Belgium-based Anheuser Busch Inbev’s takeover of SABMiller, valued at $120.3 billion, was the fifth-largest deal in history and the second-biggest of the year. Royal Dutch Shell’s acquisition of BG Group, worth $81.2 billion, took the third spot in 2015 deals in value terms.

Overall deal value in Europe was $1.10 trillion, its highest level since $1.52 trillion in 2007 and up by 22.4 percent compared to 2014. PMB was the top sector, followed by consumer goods and EMU, and the three sectors together accounted for almost two-thirds of the total deal value.

The U.K. had the largest share of deal value, netting $425.3 billion in investments. Europe saw record-breaking inbound deals overall, worth $512.2 billion. The Mergermarket report speculates that devaluation of the euro could have held back European companies from investing abroad. Total M&A activity in Europe still put it in the second spot in the region-wise listing.

The third place was taken by Asia (excluding Japan), which saw deals worth $927.8 billion in 2015, increasing by over 43 percent from 2014. The region saw seven deals valued at over $10 billion, with a total value of $168.4 billion. The top three deals came from Hong Kong and China, and M&A activity in Asia was led by the EMU sector, followed by financial services, and industrials and chemicals. The three sectors accounted for about 38 percent of the total deal value.

Persistently low oil prices are likely to continue the focus on the EMU sector by Chinese companies in 2016, the Mergermarket report suggested. Chinese investors made 105 deals worth $48.5 billion in the EMU sector, which amounted to 41.5 percent of the region’s total EMU activity.

A weakened euro made Europe a destination of choice for Asian investors as well. Asia's single biggest investment in Europe was in Italy, in the industrials and chemicals sector, when Pirelli was acquired by a consortium led by ChemChina for $8.8 billion.

M&A activity in Japan was worth $61.6 billion in 2015, putting it in the fifth regional spot globally, and while nowhere close to its 2007 peak of $88.2 billion, it was an increase of 91.6 percent from 2014. Financial services was the most active sector, with 22.3 percent of deal value, followed by consumer goods at 21.3 percent, and industrials and chemicals at 15.6 percent.

The biggest deal involving a Japanese company was the takeover of the non-U.S. businesses of Natural American Spirit by Japan Tobacco for $5 billion. The U.S. attracted 69 deals worth $33.7 billion from Japanese companies, making it the most popular target for Japanese investors.

Central and South America saw a 52.3 percent decline in deal value compared to 2014, hit in part by Brazil’s underperformance where M&A deals hit their lowest value in a decade. The region saw a total of 535 deals worth $62.5 billion, taking the fourth spot in terms of deal value.

With the exception of PMB and consumer goods, which saw marginal increases in value terms, every other sector in the region saw a drop compared to 2014, with the biggest decline in the EMU sector where deal value reduced by over 75 percent.

The Middle East and Africa took the last spot in overall M&A activity, with total deal value of $47.3 billion, almost 21 percent lower than 2014 and its lowest level since 2011. A total of 428 deals was led by the acquisition of South Africa-based Medic-Clinic by UAE’s Al Noor, the single deal worth $11.4 billion.

Buoyed by the big-ticket Al Noor deal, the PMB sector saw the largest share of activity, with 30.8 percent of deal value. EMU and industrials and chemicals took the second and third spots, for a total of 34.7 percent of deal value.

“There are no warning signals that M&A will divert from the high speed track it has taken during this year [2015],” Kirsty Wilson, global research editor at Mergermarket, said.