A break in the clouds: M&A in the first half of 2019
The US M&A market delivered a surprisingly robust first half, with total value rising 9 percent year-on-year. Volume, on the other hand, dipped 21 percent
Foreword
Partner|New York
After a drop in activity in the second half of 2018, US M&A has recovered strongly in the first two quarters of 2019, demonstrating the appeal of dealmaking—despite uncertainty.
In spite of several quarters of growing uncertainty about macroeconomic headwinds, US M&A deal value grew again in the first half of 2019. Overall value for the first six months of the year was up 9 percent compared to the same period in 2018. And US deal value took up a larger share of global M&A, making up 53 percent of total global deal value, up from 41 percent in H1 2018. US deal volume, on the other hand, was down 21 percent compared to 2018, a record year for deal volume.
This is good news, particularly since global activity declined on both value and volume measures this year. But the future seems more uncertain today than it has in some time, particularly since there are strong reasons for both caution and optimism.
There are some signals warning that we are due for an economic correction, despite a US economy that remains healthy. US Federal Reserve Chairman, Jerome Powell, recently hinted at rate cuts, highlighting that uncertainty over trade policy and weakening global growth continue to have negative implications. Trade troubles persist, particularly with China. An inverted yield curve suggests that the market expects a downturn on the horizon. And, after a lengthy period of frenzied dealmaking, valuations are high.
Yet the US economic backdrop remains favorable, at least for now. Capital markets are at record levels and there is plenty of financing available for companies who need it to fund dealmaking. Private equity firms continue to amass capital to deploy.
Though deal volume has dropped for three quarters in a row, viewed in the longer-term context, activity remains robust.
Whether the second half of the year can sustain the same level of activity as H1 remains to be seen. The year-on-year growth in M&A value suggests that dealmakers still have appetite, as well as the capacity, to execute deals if the strategic rationale makes sense.
Private equity slows in 2019 as valuations continue to rise
Despite accumulating a vast, historic pile of capital for acquisitions, private equity has moderated its pace of buyouts in the first half of the year
Sector watch
Sector overview: Pharma and TMT lead the pack
The pharmaceutical, medical and biotech sector was number one by value, followed by technology, media and telecoms (TMT). TMT led by volume, followed by industrial and chemicals.
Pharma chases innovation through deals
The need to replenish intellectual property has pushed the pharma industry to the highest-performing sector by M&A value
Technology dealmaking stays buoyant
H1 2019 has seen deal value continue to climb in technology M&A, as digital disruption overtakes segments of the market such as fintech and Big Data
Retail M&A falls as sector migrates online
M&A activity in the retail sector fell sharply during the first half of 2019, as uncertainty and digital disruption continue to put pressure on the sector
Megadeals drive oil & gas M&A
Concerns about the price of oil have left the industry reluctant to strike deals, bringing down volume and value in H1
Real estate M&A drops, but hopes are higher for H2
After a standout 2018, real estate M&A has dropped significantly in the first half of 2019, but segments of the market such as logistics and hotels have remained attractive
In Focus
Three key M&A decisions from Delaware courts
The first half of 2019 saw several decisions from the Delaware courts that will affect M&A dealmaking
SEC proposal would ease burden of certain financial disclosures on public companies
Proposed revisions to current financial statement disclosure requirements for business acquisitions and dispositions would simplify compliance while ensuring investors get the information they need
Conclusion
Can the good times last? Four factors shaping M&A in the second half of 2019
Many of the factors that have underpinned recent M&A activity remain in place, but concerns are mounting
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