Even with the continued uptick in mega deals during 2019, the third quarter saw a significant worldwide decline in mergers and acquisitions. The volume of global M&A was down by 34% in the third quarter, with $631 billion in worldwide public and private mergers and acquisitions deals announced, as compared with $962 billion in the second quarter. The third quarter’s deal volume was the lowest for any quarter since the first quarter of 2014.
Despite the fact that the first and second quarters were relatively strong for global M&A volume, the third quarter’s lower numbers, in addition to fourth quarter performance in recent years, suggest that there is a low likelihood that year-end results will match last year. A gap of nearly a trillion dollars in M&A deals, added to 2019 volume of $2.4 trillion through the third quarter, would be needed to reach 2018’s global volume of $3.2 trillion.
Mega Deals in 2019: A Year of Larger Deals than 2018, So Far
This year is still shaping up to be a year of larger deals, measured by average deal size, compared to 2018. The continued dominance of mega deals also continues to push up the average size of mega deals and, because of their sheer size, the overall average size of M&A deals.
The third quarter’s announced mega deals have brought the 2019 mega deal count up to 29 announced deals and raised mega deal volume up to $870 billion, representing 37% of the total global M&A volume. This year’s mega deal volume through the third quarter already surpasses 2018 and 2017 full-year mega deal volumes. Rumored or proposed deals, such as the recently withdrawn $36.2 billion unsolicited takeover bid for London Stock Exchange Group Plc by Hong Kong Exchanges & Clearing Ltd., are not included in these totals.
The average global mega deal size in 2019 is $30 billion, up from was $23 billion in 2018. These mega deals have also raised the overall average global M&A deal size: In 2018 the average global M&A deal size was $271 million, and through the third quarter, the average deal size in 2019 is $306 million.
U.S. Targets Most Popular in Cross-Border Mega Deals
In cross-border mega deals, the U.S. is the top target country, with $73 billion in pending or completed U.S.-target/foreign-acquirer mega deals thus far in 2019. The London Stock Exchange Group’s pending acquisition of Refinitiv Holdings Ltd for $27 billion is the largest U.S.-target cross-border mega deal announced through the third quarter. The LSE -Refinitiv Holdings Ltd deal is the sole U.K.-acquirer/foreign-target mega deal in 2019 to date, and it single-handedly puts the U.K. in the position of the top acquirer country by volume in cross-border mega deals.
Switzerland’s Nestle Skin Health SA was acquired by United Arab Emirates’ Abu Dhabi Investment Authority and Stockholm-based private equity firm EQT Partners AB (Fund: EQT VIII SCSp) for $10 billion. According to Bloomberg, the sale of the skincare line of business including Cetaphil moisturizers and Proactive acne treatments is one of Nestle’s biggest divestments in the last 10 years.
Japan’s Asahi Group Holdings Ltd’s pending acquisition of Cub Pty Ltd is Japan’s only foreign-target mega deal so far this year. Japan’s last foreign-target cross-border mega deal was 2018’s Shire PLC – Takeda Pharmaceutical Co Ltd. deal for $81 billion, which majorly impacted the global pharmaceutical industry.
Only three countries—the U.S., the U.K. and Canada—have been both target country and acquirer country in cross-border mega deals announced through the third quarter of 2019.
Financial Sector Most Acquisitive Sector; Pharmaceuticals Most Acquisitive Industry Group
Deals involving financial sector acquirers, totaling in $825 billion in value, accounted for 35% of all global deals through the third quarter. Within the financial sector, private equity acquirers (with $190 billion in deals), and diversified financial services acquirers (with $130 billion in deals) accounted for the largest slices of the financial sector acquisitions.
Deals involving acquirers in the consumer, non-cyclical sector, totaling $494 billion, accounted for 21% of all global deals through the third quarter.
Pharmaceutical industry acquirers announced the highest global deal volume of any other industry group with $278 billion in deals, which represents 12% of all global M&A. Global pharma acquisitions volume, through the third quarter of 2019, has already far surpassed 2018’s total volume of $171 billion.
Among the largest acquisitions by the pharma industry in 2019 so far have been the $88.8 billion Celgene Corp-Bristol-Myers Squibb Co deal, the $83.8 billion Allergan PLC-AbbVie Inc. deal, the $32.7 billion Pfizer Inc.-Mylan NV deal, and the $11 billion Array Biopharma Inc.-Pfizer Inc. deal. According to Bloomberg, the Mylan deal, a Reverse Morris Trust transaction in which the Upjohn unit will spin off then merge with Mylan, is set to “reshape the brand-name and off-patent pharmaceutical industries.” Major transformations and high activity in the pharma sector is a theme for the year.
Real Estate Most Popular Global Target Industry
While the financial sector is the most acquisitive, it comes in second place as a target sector. For global targets, financial and consumer, non-cyclical are the most popular target sectors with 21% and 25% of all deals involving targets in those sectors, respectively.
Targets in the real estate industry group are the most popular targets in global M&A so far in 2019 with $193 billion in pending and completed deals.