Our thinking

Defying gravity: US M&A H1 2019

What's inside

A rise in US mega-transactions more than made up for a drop in volume in the first half of 2019


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.

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

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


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

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

2 min read

While the first-half total of 505 transactions in the technology sector represents a 16 percent decrease in volume compared to the same period of 2018, these deals were collectively worth US$123.4 billion, a 61 percent increase on the first half a year ago. The top end of the M&A market, boosted in particular by the US$25.7 billion purchase of Total System Services by Global Payments, has remained active.

That reflects a natural extension of the M&A trajectory seen in the tech sector over the past two to three years. In the first phase of disruption, M&A volumes were boosted by the desire of private equity firms and industry bidders alike to acquire new entrants, secure key talent and skills, and remain competitive. The sector may now be moving into a second phase, in which a wave of consolidation brings smaller numbers of larger transactions as organizations seek scale.

Global Payments’ purchase of Total System Services provides a good example of this trend, with payments technology companies now seeking to consolidate in order to fend off competition from new fintech entrants to the industry.

The enterprise software segment is another area to have seen significant activity. The sector’s leaders are keen to offer a broader-based product range to help businesses transition to cloud computing—and make the best of the switch. Tableau—which was acquired this year by Salesforce for US$15 billion—is one such firm, developing software tools to make it easier for workers not trained in data science to create visualizations out of raw data.

Valuations in the tech sector remain strong. While there are some headwinds on the horizon, including increased regulatory scrutiny for technology-driven deals, competition for assets still persists. In addition to tech businesses seeking consolidation, bidders include non-tech players seeking to acquire new capabilities as their industries transform, and private equity firms, which still have dry powder at their disposal.

Top tech deals
H1 2019

1: Global Payments Inc. bought Total System Services Inc. for US$25.7 billion

2: Salesforce.com bought Tableau for US$15 billion

3: Hellman & Friedman – Blackstone consortium bought Ultimate Software Group Inc. for US$11.8 billion





This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2019 White & Case LLP