As seen elsewhere in this blog, the volume of global mergers and acquisitions (M&A) in the first half of 2015 (H1 2015) reached near record-setting heights. According to a recent report from Deallogic, the total volume of M&A deals reached $2.28 trillion in H1 2015, second only to the $2.59 trillion recorded in the first half of 2007.
In particular, the volume of M&A deals targeting firms in the United States surpassed $1 trillion, which marks the first time any nation has eclipsed that milestone. In the second quarter of 2015 alone, the deal volume in the United States was approximately $640 billion.
There are undoubtedly many factors that could have contributed to these numbers. Experts have speculated that the United States’ low interest rates and the stable growth environment in the United States have spurred M&A activity. It has also been suggested that the expected rising of interest rates in the near future has played a role in driving the record numbers. Additionally, a number of unusually large cross-border deals, in the context of a strong global M&A market, have enhanced the United States’ performance. Finally, as discussed elsewhere on this blog, H1 2015 has seen a number of deals that have much higher values than normal – so-called “mega-mergers“.
Another interesting observation from the past six months has been the rush towards consolidation in several key sectors, including health care insurance and the semiconductor industry. The health care industry in particular offers some interesting insights into the influence of changing regulatory environments on M&A activity. As described in KPMG’s 2015 M&A outlook survey, the Affordable Care Act is expected to be the most significant driver for 2015 deal activity in the area of healthcare. Others, including a Professor at the University of Pennsylvania’s Wharton School of Business, have echoed these thoughts. They speculate that the increased competition brought about by the Affordable Care Act has stimulated a “counterattack” on the part of healthcare insurers, who have attempted to reduce competition through consolidation. It is speculated that this has driven significant M&A activity among large health insurance companies over the past six months.
It is also important to bear in mind the chain-reaction effect that rapid consolidation can have: buyers tend to act more quickly in fast-moving environment as the pool of acquisition targets shrinks and competitor companies become larger. While the future of M&A volume in the health-care industry, and across industries in the United States, is always difficult to predict, it seems likely that rapid consolidation will continue to spur more activity in the near future.
The author would like to thank Geoff Mens, summer student, for his assistance in preparing this legal update.
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