Mega-transactions drove the M&A market during the first half of 2019, according to a new report: Defying gravity: US M&A H1 2019 by global law firm White & Case LLP and M&A data provider Mergermarket.
The report found that M&A activity in the first half of 2019 grew 9 percent in value compared to the same period in 2018. 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, which was a record year for deal volume.
"The US economic backdrop remains favorable, at least for now," says John Reiss, Global Head of M&A at White & Case. "There are some warning signs that we may be due for an economic correction, yet despite this, overall the US economy remains healthy," he added.
The report also details additional factors affecting M&A activity, such as increased rhetoric on protecting US interests from foreign investment. Reviews by the Committee on Foreign Investment in the United States (CFIUS) have increased and last year the Trump Administration signed the Foreign Investment Risk Review Modernization Act (FIRRMA), a reform that extends CFIUS’s reach into certain sectors such as real estate and tech.
In addition, the report outlines that private equity (PE) buyout activity fell 14 percent compared to the first half of 2018, with values totaling US$111.1 billion during the first six months of 2019, while volume fell 19 percent to 608 deals. On the other hand, exit activity fared far better, rising 19 percent in deal value to US$148 billion, though volume fell 15 percent to 505 deals.
"I think across the board we're going to have a strong 2019. It will not be as strong as 2018, but the same factors that have led to a lot of M&A activity over the last couple of years are still there. The US remains an attractive market for investors, the economy is strong and people are optimistic," Reiss says.
US sector highlights include (see report for more details):
- TMT led in terms of volume, with 622 deals in the US TMT sector in H1 2019—42 percent higher than the next busiest sector
- Pharmaceutical, medical and biotech industry led in value, with 282 transactions totaling just over US$172 billion
- As digital disruption overtakes segments of the market, tech M&A increased 61 percent in value compared to H1 2018, with a total of US$123.4 billion
- Retail M&A dropped 43 percent in value compared to H1 2018 as uncertainty and digital disruption continue to put pressure on the sector
- Oil & gas M&A dropped 9 percent in value compared to H1 2018 as concerns about the price of oil have left the industry reluctant to strike deals
- Real estate M&A dropped 24 percent in value compared to H1 2018, but segments of the market such as logistics and hotels have remained attractive
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