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ANALYSIS: U.S. M&A Mega Year in Review

Jan. 10, 2020, 11:01 AM

2019 was an exciting year to follow mergers and acquisitions. Eye-popping deals involving major industry players and household names dominated the merger headlines, viz. Raytheon Co., Bristol-Myers Squibb Co., Anadarko Petroleum Corp., Tiffany & Co., and Fiserv Inc., just to name a few. But fourth-quarter data are in, and it’s not all good news.

2019 has some impressive stats, including a long list of mega deals, valued at $10 billion or greater, that were both announced and completed in the year (see table within). The middle and large markets, taken separately, however, had their lowest volumes and counts since 2013.

Looking back on the past decade, 2019 was a record year for U.S. M&A in the combined middle, large, and mega markets by several measures: by aggregate dollar volume ($1.8 trillion), by average deal size ($1.8 billion), and by mega deal count (28 announced) and aggregate volume ($836 billion). By these measures, 2019 dwarfed most years in the 2010s except 2015, which was a colossal M&A year in the U.S.

2019’s high numbers were driven by a mega market that boomed during an anxious year with heightened macro-economic worries such as recession fears and trade war escalation. While booms and busts drive M&A for different reasons, this year’s economic climate did not spark deals in the middle and large markets, which comprise the majority of M&A activity.

The U.S. M&A market showed overall strength and resilience in 2019, giving us an optimistic start to 2020, but it wasn’t the best year for every market segment.

The Win is in the Dollars (Not the Number of Deals)

2019’s volume in announced M&A deals valued at $100 million or greater of $1.8 trillion surpassed 2018’s volume of $1.7 trillion (the third-ranking year by volume in the decade). 2019’s volume exceeded all other years of the decade except 2015, which saw $2.1 trillion in deals announced and was the number-one volume year during that period.

The year’s deal count of 1,039 deals valued at $100 million or higher, however, was the lowest since 2013. 2019’s high volume coupled with a comparatively low deal count raised the year’s average deal size to $1.8 billion for the middle, large, and mega markets, combined. This was the second-highest average deal size of the decade.

It Really Was a Mega Year

In 2019, 28 mega deals, valued at $10 billion or higher, were announced. The total value of these 28 mega deals was $836 billion. This is the second-highest annual mega deal count and dollar volume of any year in the last decade. 2015 saw the highest mega deal count and volume since 2010, with 44 mega deals valued at a total of $1.2 trillion.

Impressively, 15 mega deals were announced and completed in 2019. These completed mega deals include some of the largest announced deals of the year such as the $87.6 billion Celgene Corp-Bristol-Myers Squibb Co. deal and the $55.2 billion Anadarko Petroleum Corp.-Occidental Petroleum Corp. deal. Deals of this size often face significant hurdles to reaching completion, including regulatory difficulties. It is striking that these 15 deals, with an aggregate value of $394.8 billion (representing 22% of the entire mid to mega U.S. M&A market’s total volume for the year), were able to close the same year parties first entered into definitive agreements. To call out one counter-example that grabbed much attention in 2019, the $57.8 billion Sprint Corp.-T-Mobile US Inc. deal was announced in April 2018 and has yet to close due to antitrust delays.

Six of the 15 mega deals announced and completed in 2019 were all-stock deals.

The Middle and Large Markets

The middle market, comprising deals valued between $100 million and $1 billion, accounted for 78% of the number of deals announced in the middle, large, and mega markets in 2019. But the total of 815 middle market deals announced in 2019 was the lowest count for that market segment since 2013, and marked a 12% drop in deal count from 2018. By volume, the middle market also saw its lowest year since 2013 with $258 billion in announced deals.

The large market also had its lowest year by count and volume since 2013, with 196 deals announced valued at $519 billion.

The Private Equity Landscape

Private equity played a role in the mega market boom of 2019. Announced private equity deals, valued at a total of $81.3 billion, comprised one-tenth of the total mega deal volume last year.

Looking at the middle, large, and mega markets combined, private equity deals comprised 23.7% all U.S. M&A volume last year, with $345 billion in announced private equity M&A deals.

This marks the second year in a row that private equity’s U.S. M&A market share has fallen. In 2018, 25.2% of the M&A deals announced in the U.S. were private equity deals ($428 billion). Global private equity firms closed the year with a record $1.5 trillion in unspent capital, as reported by Bloomberg News. Will this dry powder fund more private equity M&A acquisitions in 2020?