The global M&A; market remained strong in 2018 with announced transaction volumes reaching $4.1 trillion, the third-highest year: Corporate Finance Coursework, QMUL, UK

University Queen Mary University of London (QMUL)
Subject Corporate Finance

The global M&A; market remained strong in 2018 with announced transaction volumes reaching $4.1 trillion, the third-highest year ever for M&A; volumes. The announced volume in the first half of 2018 was robust, representing the second-highest first half of all time. The activity was largely driven by “megadeals”.

Thirty megadeals were announced in the first six months of 2018 — the highest first-half megadeal count on record — compared with 14 deals in the first half of 2017. The number of megadeals began to normalize throughout the second half of the year, although they continued to be a significant driver of activity in 2018.

While megadeals were a large driver of M& A-announced dollar volumes in 2018, the count for deals greater than $250 million also increased by 7% from 2017, with activity remaining robust across all deal types. The activity was brisk across domestic and international deals, strategic and private equity, and all sectors, with technology and healthcare representing the largest contributors to global volume in 2018. Private equity funds continued to have ample “dry powder” and deployed this capital throughout 2018; sponsor buy-side volume was up 9% YOY.

Corporate Finance

Several of the key drivers and catalysts of M&A; A have continued from prior years. Positive global growth, improving cash flows, strengthening balance sheets, low cost of debt, investor support, and CEO confidence all continued to boost M&A; activity. The biggest new tailwind this year was the implementation of tax reform in the U.S., which helped generate incremental cash flows and provided access to overseas funds.

Innovation, disruption, and the need for growth also contributed to M&A activity, driving change across industries, geographies, and organizations. An accelerating rate of disruption has driven the need to act with urgency. As a result, new consumption patterns, new platforms, and new business models are resetting the basis of competition, redistributing industry economics, and reallocating value. We’ve seen a drastic increase in the technology sector over the past decade, more than doubling its share of the overall M&A market as the sector continues to innovate to meet changing demands.

While geopolitical uncertainty was prominent throughout the year and created many headlines, it had a limited effect on deal volumes in the first half of the year but may have contributed to the deceleration of activity toward the end of 2018. Meanwhile, cross-border M&A volume remained strong, accounting for 30% of the total M&A market, but with a different mix: China’s outbound M&A continued to decline, while Japan’s outbound M&A was robust throughout the year, with a record $184 billion in announced volume and a record number of deals larger than $1 billion. However, Japan’s activity benefitted disproportionately from Takeda Pharmaceutical’s acquisition of Shire for $81 billion.

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