Despite growing concerns over the state of the Chinese economy, global M&A activity has been quietly growing. According to Mergermarket’s September insider, August 2015 was the highest valued August ever with US$297.8bn total deal value. This 12.7% increase came despite 335 fewer deals when compared to August 2014. The top sector was Industrials & Chemicals with 203 deals accounting for US$76.6bn, a remarkable 291% increase over the previous year. Extraordinarily, 2015 has also been the second highest valued 8 months in Mergermarket history with 7,863 deals worth US$2.5tn falling just behind the record year of 2007 when there were 10,836 deals worth US$2.7tn through August.
The North American market was exceptionally active during the month of August. What is traditionally though to be a quiet month contributed US$171.6bn in deal value on just 309 deals. The US dominated the market, contributing 98.8% of the deal value. In Canada, there was a significant slowdown of activity. There were only 22 deals accounting for US$2bn of value, a drop of 64.6% when compared to July and an 87.8% drop when compared to August 2014.
The European market was healthy but disappointing. August had the third highest monthly total post crisis, but saw a 1.6% decrease to US$51.3bn from the previous year. While the decrease was not substantial, the total summer saw a 32.3% decrease compared to summer 2014, which is disappointing because 2015 began as the strongest opening to a year since 2008. The most active country was Italy, accounting for 28.1% of total activity or US$14.4bn. The most active sector was Industrial & Chemicals, which rose 306% over August 2014, to US$12.9bn. Despite all of the uncertainty and slow summer months, 2015 is poised to finish as one of the best years for M&A in Europe post crisis.
By comparison, Central & South America grew steadily for the second month in a row. July 2015 was the highest total deal value total of year with US$13.2bn and August was the second highest with US$9bn. This came about despite declining growth in Brazil, which generally accounts for over 70% of the M&A value in the region. Chile continued its upward trend and surpassed Mexico as the region’s second highest contributor for August.
The Middle East & Africa attracted 21 deals, valued at US$2.8bn, which is an 8.7% increase over July, and a 115.6% rise over August 2014. While it still falls well short of August 2013’s US$9bn deal value, this past August still indicates a strong year-over-year increase. The sharp fall in oil prices has highlighted the continued need for consolidation in the region. As a result, Energy Mining & Utilities re-emerged as the top sector for August, with US$1.9bn in value.
The aging population in Japan has caused the domestic insurance market to suffer greatly. Accordingly Japanese companies are expanding overseas, which is demonstrated by the US$3.8bn acquisition of US-based Symetra by Sumimoto Life. In total, Japan’s deal value in July and August 2015 was strong with US$5.3bn, already surpassing the entire Q3 2014. Japan-targeted M&A has reached the second lowest August total in a decade, with only US$771m in inbound activities. However, according to Mergermarket intelligence, there is strong interest in Japanese companies, but most deals are still in the negotiation stage and will take longer periods to materialize.
The Asia-Pacific region showed tremendous resilience as it bounced back from a very slow July, rising 72.5%, and 58.9% over August 2014. The top deal of August went to Brookfield Infrastructures Partnership’s acquisition of Asciano Limited for US$9.45bn, but China claimed top spot as it lead the Asia-Pacific region with US$42.9bn of the total US$59,3bn region total. This shows the volatile stock market has not had the predicted deleterious effect. Instead, it may have created attractive prices for bidders. Nevertheless, going forward, the woeful stock market and shredded investor confidence may make new M&A hard to come by in China.
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