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M&A Trends in the Americas: Where Large Deals are the New Normal

Over the last three years, financial markets in the Americas have experienced a 78.7% increase in M&A activity, according to S&P Global Market Intelligence analysis.  This number is slightly higher than the growth in global M&A activity over the same time period of 74.0% (click here to see my global M&A trend blog).  To gain a better understanding, we analyzed the mergers and acquisition market in the Americas and came away with several interesting takeaways: 

  1. Americas M&A activity as measured by total deal value has increased over the past 3 years, but is showing signs of slowing down. 
  2. Materials, healthcare and information technology are the top 3 industries driving growth in M&A activity. 
  3. Large deals (those over $1 billion in deal value) have been increasing over the past 3 years in all industries except telecommunication services, energy and utilities.
  4. Large deals increasing contribution to M&A activity in the Americas means that large firms are actively making more acquisitions to drive profitability rather than organic growth.  Acquirers are paying more of a premium for target companies than in previous years. 


Total M&A Deal Values by Year

As you can see from the chart above, total M&A deal value has grown from $1.28 trillion in 2013 to $2.28 trillion in 2015.  This represents a 78.7% 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 49.9% 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 in the Americas.  

Total M&A Deal Values By Sector

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, materials, healthcare and information technology with 238.7%, 212.3% and 165.9% growth, respectively, represent the top three sectors for M&A activity.  

Large Deals as a % of Total M&A Deal Values

The third 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, energy and utilities).  At the same time, large deal volume represents more than half of total M&A deal value in all sectors.  This is especially significant, because as large deals contribute more to M&A activity, it signals that large firms are more actively searching for acquisitions to drive profitability rather than organic growth.  

Total M&A Deals with Average EBITDA Multiple

The last step in our analysis was to revisit the entire M&A market in the Americas by the total number of deals and the average disclosed transaction EBITDA multiple.  As the above chart demonstrates, the number of deals increased from 9,892 in 2013 to 11,011 in 2014, but then fell to 10,449 in 2015.  At the same time, the average transaction multiple also increased from 14.6 in 2013 to 17.99 in 2014 and then back down to 16.99 in 2015.  This upward trajectory of the average transaction EBITDA multiple would suggest that acquirers are paying more of a premium for their target companies than in previous years. 

For more information on the tools and products used for this analysis, click here.    

*Data from S&P Capital IQ Platform as of April 2016.

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