Mergermarket 15
mergermarket.com
US Analysis
“Tax reform, which includes
a sizeable cut to the US
corporate tax rate, has
fueled anticipation over
how future tax savings
might be spent, particularly
with regard to M&A.”
Elizabeth Lim,
Research Editor (Americas)
US
Global & Regional
M&A Report Q4 2017
• US M&A saw US$ 1.3tn worth of deals announced in
2017, with a total of 5,326 transactions reaching the signing
table. This was the second consecutive year of decreases
in overall value since the record highs of 2015, at the end of
which interest rates, effectively zero since 2008, had finally
begun to rise slightly. As the economy continues to move
on from the financial crisis, inflation has remained low, and
further increases in the federal funds rate are expected in
2018 following three gradual raises in 2017. Further, Congress’
recently passed tax legislation, which included a sizeable cut
to the US corporate tax rate, has fueled anticipation over how
future tax savings might be spent over the next several years,
particularly with regard to M&A. US dealmaking therefore,
while still cautious in today’s political climate, has continued at
a steady pace.
• Despite coming under fire from the political arena, Media
M&A continued to feel pressure from industry challengers
such as Netflix to consolidate in order to survive in an age
of digital streaming. The sector saw US$ 103bn worth of
deals, its second-highest total value behind 2016’s peak of
US$ 133.3bn, though most of the latter had been due to
the US$ 105bn AT&T/Time Warner transaction, whose fate
remains unclear after a block by the Justice Department in
November. However, such events did not prevent Disney from
announcing that it had signed an agreement to acquire most
of Twentieth-Century Fox for US$ 68.4bn, which then became
the largest deal of 2017.
• Political issues had an effect on another space that had
peaked in 2016 – Chinese bids for US firms. After reaching a
record US$ 56.7bn and 75 transactions, 2017 saw an 81.1% fall
in value to US$ 10.7bn with 11 fewer transactions for a total of
64 buys of US companies. Multiple blocks by the Committee
on Foreign Investment in the US (CFIUS) in 2017 have led
would-be acquirers in China to rethink their strategies in
the US. According to Mergermarket intelligence, unhappy
with being labeled national security risks, dealmakers have
begun to consider avoiding US deals, with the potential for
Tech investments to be especially vulnerable to such shifts
and with Chinese companies now starting to look for targets
elsewhere.
• Meanwhile, US Technology in the age of Amazon did take
center stage in 2017, reaching a record deal count of 1,015
transactions, with its disruptive effects rippling across various
sectors including Consumer; Pharma, Medical & Biotech; and
Media. Most notably, Computer Software was one of only a
few spaces where deal count actually rose in 2017, unlike in
the general global trend; in fact, the sub-sector set a record
in 2017 with 771 transactions, even while disclosed values
were down 44.7% to US$ 64.2bn from 2016. By value, Energy,
Mining & Utilities (EMU) was 2017’s top sector, recording
US$ 260bn and 436 transactions. Though this represented
a 20.6% fall in value compared to 2016’s record high of
US$ 327.3bn, overall 2017’s total was the third-highest on
Mergermarket record (since 2001), as was deal count. Of
particular note has been growing investment in the Utilities
space – though accounting for just 16.8% of EMU’s total value,
the sub-sector reached a record value of US$ 43.7bn, with
more activity poised for 2018 given recent shifts by oil majors
away from oil and gas and more toward electricity.