Mergermarket just released the half-year edition of its 2014 Deal Drivers Americas (DDA) report, and it looks like a year full of clear skies and sunshine for the M&A market – in other words, the long-awaited revival is here.
Trends in private equity activity in the Americas
Looking at the DDA report, we see that North American deals in H1 2014 have seen a 26% rise in volume and an 88% rise in value over H1 2013. The numbers for H1 2014 are quite robust: 2,109 transactions with a combined value of $749bn USD. The DDA report cites a number of factors contributing to this increase, including low interest rates, capital-laden companies and, most importantly, strong CEO and board leadership.
The DDA report also predicts a marked increase in M&A activity in Latin America, owing to energy and telecom sector reforms in Mexico, changing societal dynamics in Brazil, and growing foreign investment into Chile and fiscally-prudent Peru.
The life science M&A market in H2 2014
Deals in the life sciences, healthcare, and TMT (technology, media, and telecommunications) sectors led the pack in H1 2014.
Though large TMT deals took the top two spots, life sciences and healthcare deals snagged five of the remaining spots, with American companies making the move to more tax-friendly jurisdictions such as the UK and Ireland. All five of these life sciences and healthcare deals were structured as corporate tax inversions – a process by which a company, while merging with a company in a foreign jurisdiction, reincorporates in the target jurisdiction for tax purposes. The DDA report predicts more such deals in this sector, one which is already globally focused and therefore more likely to reach out past national borders when looking to grow through acquisitions.
Is this a true revival, or just a cyclical flash in the pan?
The DDA report is optimistic that this upsurge is no passing trend. With stock prices steadily increasing, as well as the presence of the above mentioned factors such as favorable interest rates and CEO confidence, the big picture seems be one of continued strong M&A activity. As companies continue to track down strategic and properly valued deals, the markets will likely continue to reward them, giving companies even more incentive to keep on in that same vein.
The author would like to thank Jad Debs, articling student, for his assistance in preparing this legal update.