The final figures are in, and it is safe to say that 2014 was a home run for the US M&A market. Deal activity was at its highest level in five years. A number of factors have increased confidence among corporates, bringing them back to the dealmaking table with a fervor. Stock markets are strong in the United States, and many companies have substantial cash piles to invest as well as the backing of shareholders pressing for more deals. Importantly, the US economy is stable and growing—particularly compared to markets in Europe and Asia—and this is attracting an increasing number of non-US buyers to the United States. Megadeals, such as the proposed US$66 billion acquisition of Allergan by Actavis, have been at the forefront of the revival and helped to drive the value increase, as sectors, such as pharma and TMT, looked to consolidate. The number of deals also increased significantly, although not as much as value. We expect a broader, deeper and more active M&A market in 2015, with the prospect of dealmaking activity spreading to the under-US$5 billion market, which will drive volumes higher. In the private equity arena, buyers have stepped back somewhat due to extremely high seller expectations. The value of acquisitions by buyout firms was only 11 percent of total deal value, the lowest in three years and a significant drop from 33 percent in 2007. However, increased volatility in the market, which we have seen in the first weeks of 2015, may create greater opportunities if prices decline. On the other hand, there is no certainty that sellers’ expectations will quickly reset. Overall, deal value fell in January compared to December, but that is consistent with patterns in recent years, with value remaining static or falling from December to January in the previous two years. The momentum built in the last year looks set to continue into 2015, but there is no room for complacency. Dealmakers will be very aware of recent stock market volatility, falling oil prices and a potential pullback in the leverage markets. Although buyers should proceed with caution, there is good reason to be optimistic about the M&A markets in 2015.
US M&A hits a home run
On the back of headline-grabbing megadeals and a more stable economy, US M&A staged a dramatic comeback in 2014
John Reiss Partner, White & Case
Gregory Pryor Partner, White & Case