Over the last three years, financial markets have experienced a 74.0% increase in M&A activity, according to S&P Global Market Intelligence analysis. Some blockbuster deals during this period include: AB InBev’s purchase of SABMiller, AT&T’s acquisition of DirecTV and Medtronic’s acquisition of Covidien. We analyzed the mergers and acquisition market to gain a better understanding of where the deals are occurring and the contribution of large deals to overall global M&A deal value. Our analysis revealed several interesting takeaways:
- M&A activity as measured by total deal value has increased over the past 3 years, but is showing signs of slowing down.
- Industrials, information technology and healthcare are the top 3 industries driving growth in M&A activity.
- Large deals (those over $1 billion in deal value) have been increasing over the past 3 years in all industries except telecommunication services and represent the majority of deals in all industries with the exception of financial services.
- Large deals increasing contribution to global M&A activity means that large firms are actively making more acquisitions to drive profitability rather than organic growth.
As you can see from the chart above, total M&A deal value has grown from $2.46 trillion in 2013 to $4.28 trillion in 2015. This represents a 74.0% growth rate over the time period. More interesting is that while the total value of deals is increasing, it is doing so at a declining rate. For example, total M&A deal values increased by 45.9% from 2013 to 2014. However, from 2014 to 2015, total M&A deal values only increased by 19.2%. If the market follows this pattern going forward, the analysis would suggest that M&A deal volume momentum might be slowing down.
The next step in our analysis was to look at the changes in M&A activity as defined by total deal value per year. We used the above chart and the changes from year to year to determine which sectors have the highest growth from 2013 to 2015. In this case, healthcare, industrials and information technology with 144.4%, 129.2 % and 177.5% growth, respectively, represent the top three sectors for M&A activity.
The last step in our analysis involves looking at the contribution percentage of large M&A deals (those over $1 billion in deal value) versus the total M&A deal values for each sector. As the above chart demonstrates, all industries have seen an increase in the percentage of large deals from 2013 to 2015 (with the exception of telecommunication services). At the same time, while large deal volume is growing in financial services, it still represents less than half of total M&A deal value in the sector. This is significant, because as large deals contribute more to global M&A activity, it signals that large firms are more actively searching for acquisitions to drive profitability rather than organic growth.
For more information on the tools and products used for this analysis, click here.