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Tried and trusted: US M&A in 2017

What's inside

US dealmaking remains robust, as M&A's
strategic value remains as relevant as ever

M&A's strategic importance endures

In spite of an uncertain political backdrop, 2017 was a solid year for M&A in the US. And our exclusive survey reveals the drivers that could continue the momentum through 2018.

Following two blockbuster years was never going to be easy, but US M&A more than held its own in 2017. The total value of US M&A dropped 14.3 percent to US$1.3 trillion year-on-year, but volume increased by 0.4 percent to 5,347 deals.

Putting this into clearer perspective, 2017 value was the third-highest since the economic crisis took hold in 2008. Solid economic fundamentals continue to ensure deals were done—interest rates remain low, equity values are at record highs and there is a high degree of confidence within the business community. The US economy is growing steadily and continues to create jobs.

Uncertainty around the policy direction of Trump's first year as President weighed on dealmakers' confidence in 2017, as have concerns about antitrust enforcement and increased scrutiny of inbound deals by the Committee on Foreign Investment in the United States (CFIUS). Yet passage of a pro-business tax reform bill eased dealmakers' minds. The enthusiasm is evident in our survey of US dealmakers.

The survey also shows that strong strategic reasons continue to drive M&A. Technology is an important driver, disrupting companies in every industry, changing the way business is done and blurring the lines between traditional sector boundaries. “Old economy” companies simply have to buy tech skills and platforms if they are to survive the era of digital transformation. Meanwhile, technology companies are increasingly showing a willingness to acquire businesses that help them break into new adjacent sectors that they see as important for future growth.

Activist investors remain busy, with significant influence on corporate strategies. And traditional activists increasingly behave more like private equity funds as they partner with strategic acquirers or make acquisitions on their own. Meanwhile, private equity firms have record levels of untapped investment capital available for transactions. No dealmaker can afford to ignore macro-economic uncertainty, but the fundamentals supporting an active deal environment remain in place and M&A's strategic importance remains undiminished.

 

John Reiss
Partner, New York

Gregory Pryor
Partner, New York

 

Peaks, valleys and plateaus: The US M&A landscape in 2017

Overall deal value declined in 2017, yet it was higher than all other post-crisis years from 2008 to 2013.

street clock

US M&A survey: Drivers, dilemmas and destinations

Our exclusive survey identifies impacts from tax reforms and the repatriation of offshore capital as key areas to watch in 2018. Digital innovation remains a major driver for transactions, while effective due diligence poses a challenge.

New York City

Private equity activity reaches a peak

Record levels of dry powder and intense competition for deals caused buyout volume to reach a record high in 2017, while exit activity is encouraged by high valuations.

US dollar bank notes

Sector watch

Overview: Consumer and financial services power into 2018

The consumer, energy, financial services and tech sectors had standout years in 2017.

Pedestrians crossing in the streets of New York

Technology M&A volume skyrockets

The sector saw the highest number of deals across all industries in 2017, as the hunt for innovative technologies continues to break down sector boundaries.

Pursuit of scale drives consumer M&A

The race to consolidate resulted in a flurry of megadeals in 2017, while the disruptive impact of technology on consumer behavior continues to generate activity.

shopping carts

Insurance deals power financial services M&A

Insurance assets are attracting dealmakers due to low capital requirements and steady cash flows. Established fintech providers are using M&A to expand geographically.

High-rise buildings

Energy dealmaking is fueled by oil and power

Oil & gas dealmaking continues to generate the bulk of sector activity; consolidation in the power sector was driven by unsettled market conditions.

industrial heat pumps

Industrials and chemicals M&A moves into the digital age

While market uncertainty surrounding tax reforms and NAFTA negotiations caused sector deal value to take a hit in 2017, technological convergence continues to generate a healthy level of deals.

petrochemical industry

Searching for the next big thing: Healthcare M&A

The hunt for blockbuster drugs is driving activity within the sector, while technology firms’ increasing presence in the market will be an area to watch in 2018.

white plastic bottle on the production line of the conveyor

Conclusion

Four key trends moving the M&A needle in 2018

M&A's strategic relevance will ensure transactions continue to close in the face of geopolitical uncertainty. But trends in four areas—taxation, technology, PE, and antitrust—could define the coming year of dealmaking

Brooklyn Bridge, New York

Meet our partners

Global M&A leaders

John Reiss

John Reiss
Partner, New York

 

Gregory Pryor

Gregory Pryor
Partner, New York

 

 Dr. Jörg Kraffel

Dr. Jörg Kraffel
Partner, Berlin

 

Christopher Kelly

Christopher Kelly
Partner, Hong Kong

 

Allan Taylor

Allan Taylor
Partner, London

 

 Barrye Wall

Barrye Wall
Partner, Singapore

 

John Cunningham

John Cunningham
Partner, London

 

Alexandre Ippolito

Alexandre Ippolito
Partner, Paris

 

Technology

Technology M&A volume skyrockets

The sector saw the highest number of deals across all industries in 2017, as the hunt for innovative technologies continues to break down sector boundaries

Insight
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4 min read

Emerging technologies—including those related to autonomous vehicles, blockchain and machine learning—continue to drive acquisitions, as companies seek scale and market presence. The TMT sector underwent a 33.7 percent drop in value year-on-year to US$240 billion, but volume increased 4 percent to 1,213 transactions—the highest across all sectors in 2017.

However, big-ticket deals are still very much on the table, as evidenced by semiconductor group Broadcom's unsolicited US$130 billion bid for wireless technology business Qualcomm. The proposed deal would result in the largest tech deal in history.

1,213

Number of TMT deals in the US in 2017—the highest across all sectors in 2017

 

Diversification and consolidation

"The largest technology companies want to capitalize on ever-growing markets for cloud-hosting and cloud-computing, as well as digital content distribution, machine learning and AI," says Bill Choe, partner at White & Case. Cisco Systems, for example, has announced its plans to acquire machine learning operations analytics firm Perspica and fold it into AppDynamics, an application performance analytics business it previously acquired for US$3.7 billion in January. The AppDynamics deal was part of Cisco's wider strategy to diversify and broaden its networking hardware expertise into data analytics.

Meanwhile, the need to consolidate within the semiconductor space continues to drive deals in the top end of the market. In the largest US tech transaction of the year, Marvell Technology Group acquired rival chipmaker Cavium for US$6.3 billion. The deal signals the ongoing trend of consolidation within the industry, as larger firms, such as the previously mentioned Broadcom, threaten to monopolize the market.

US $240 billion

Value of deals in US technology M&A in 2017— a 33.7 percent drop compared to 2016

 

Everyone's a tech company now

Tech deal activity continues to be spurred by transactions that enable tech companies to use M&A to expand into adjacent sectors, as was the case with Amazon's purchase of upmarket grocery chain Whole Foods for US$13.5 billion.

Another example is online media firm Internet Brands' US$3.4 billion purchase of WebMD, a provider of health information services through various online portals and mobile platforms. "The ubiquity of connected smart devices and advancements in computing power and storage capacity have transformed industries across the board and broken down historical barriers," says Arlene Hahn, partner at White & Case. "As a result, companies that were historically considered bricks-and-mortar are now potential tech targets."

 

TOP TECHNOLOGY DEALS 2017

1. A consortium led by SoftBank agreed to acquire a 17.5 percent stake in Uber Technologies, Inc. for US$9 billion

2. Marvell Technology Group agreed to acquire Cavium, Inc. for US$6.3 billion

3. Cisco Systems bought AppDynamics for US$3.7 billion

    
    

 

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© 2018 White & Case LLP

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