The first half of 2014 saw a great dealmaking revival in the United States. Deal values are up to their highest levels in five years, the use of shares to finance deals has hit a six-year high and inbound M&A into the United States has posted the best first half on record since H1 2007.
This uptick in activity has been a long time coming. Corporates and private equity firms have been sitting on substantial cash piles for years, and have finally found confidence to pursue expansion through M&A again, along with willing sellers.
The backdrop for dealmaking now looks the most favorable in years. The US economy has delivered steady growth for the last four years, and the S&P 500 has climbed by 96.7 percent since 2009. Shareholder support for deals is more robust. Chief executives and boards are increasingly optimistic and are willing to pay high prices for acquisitions. Growth is important, and when a board sees everyone around them growing by acquisition, there is a competitive imperative for them to do the same.
The regulatory environment has been supportive of M&A, too. Even in a market where regulation has been generally viewed as quite restrictive, buyers are increasingly able to develop rationales that quell regulators’ concerns.
However, despite the M&A market looking stronger than at any time since the financial crisis, this is not a time for complacency. A big part of the recovery story has been driven by large corporate-backed megadeals. Deal values are significantly higher as a result, but there has not been a parallel increase in deal volumes. Private equity’s share of total dealflow is down. If megadeal activity eases, the rest of the market may feel the repercussions. Overall volume will have to increase before we can confidently say that the US M&A market has recovered fully.
As we go to press, we note that stock markets have been rocky recently, and government action has led the AbbVie board of directors to withdraw its support for the Shire acquisition. Pundits have begun to predict the end of the M&A boom. We aren’t so sure. Without the impact of a significant exogenous shock, we expect 2015 to be a very active year for US M&A. The US economy and the US M&A market are in a much better state than they were five years ago—and they are quite strong compared with Europe and Asia.
We hope you find this report informative, and welcome the opportunity to discuss these subjects with you in greater depth.
After a tough few years, acquisitions in the United States have seen a remarkable resurgence
John M. Reiss
Partner, New York
T +1 212 819 8247
E jreiss@whitecase.com
Gregory Pryor
Partner, New York
T +1 212 819 8389
E gpryor@whitecase.com
Private equity
Oliver C. Brahmst
Partner, New York
T +1 212 819 8219
E obrahmst@whitecase.com
Antitrust
Rebecca H. Farrington
Partner, Washington, DC
T +1 202 626 3599
E rfarrington@whitecase.com
Finance
Eric L. Berg
Partner, New York
T +1 212 819 8253
E eberg@whitecase.com
CFIUS
Richard J. Burke
Partner, Washington, DC
T +1 202 626 3687
E rburke@whitecase.com
Tax
J. William Dantzler
Partner, New York
T +1 212 819 8543
E jdantzler@whitecase.com
United Kingdom
Ian Bagshaw
Partner, London
T +44 20 7532 1575
E ibagshaw@whitecase.com
Benefits
Henrik P. Patel
Partner, New York
T +1 212 819 8205
E henrik.patel@whitecase.com
France
François Leloup
Partner, Paris
T +33 1 55 04 15 17
E fleloup@whitecase.com
Germany
Dr. Joerg Kraffel
Partner, Berlin
T +49 30 880911 0
E jkraffel@whitecase.com
Asia
Barrye L. Wall
Partner, Singapore
T +65 6347 1388
E bwall@whitecase.com
Central & Eastern Europe
Michal Smrek
Partner, Prague
T +420 255 771 111
E msmrek@whitecase.com
US M&A is
bouncing back
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