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Q1 M&A Off to Hot Start

By David Marcus | Published on March 29, 2018

Blockbuster deals and a very strong private equity market highlighted M&A activity in first quarter of 2018. With 250 intra-U.S. deals of $100 million or more, M&A deal volume was on par with the last four years, but those 250 transactions were worth $391 billion, a pace just shy of 2015, a record year according to Dealogic, the source of all data in this story. (All figures are for deals of $100 million or more.)

The news was even better in PE, where the 25 deals worth a cumulative $38.9 billion set a pace for the best year in PE since 2007. Lest that unnerve readers who remember what followed the crash of the PE bubble in the summer of 2007, that year saw 227 U.S. targeted buyouts worth a total of $382 billion, an activity level more than twice that of the first quarter. In the two biggest PE deals announced so far this year, Carlyle Group and GIC agreed to pay $12.41 billion for AkzoNobel NV‘s specialty chemicals division and Blackstone Group LPCanada Pension Plan Investment Board and GIC inked a deal to pay $11 billion for 55% of Thomson Reuters Corp.‘s financial and risk business.

GIC’s presence on both situations is a reminder of how much has changed in private equity since the frenzy of the mid-aughts. Sovereign wealth funds and pension funds like CPPIB are frequent co-investors with PE shops, while club deals have become a rarity.

Healthcare accounted for 24% of the quarter’s deal activity, and though annualized deal volume was down 17% from 2017, dollar volume was up 64%, thanks in large part to Cigna Corp.‘s (CI) $67 billion agreement to buy Express Scripts Holding Co.(ESRX) Another blockbuster could be in the works, as Humana Inc. (HUM) is rumored to be in talks with Walmart Inc. (WMT) and would likely command a premium above its $39 billion market capitalization. There were also two large deals in the biotechnology sector: Sanofi SA (SNY) paid $11.6 billion Bioverativ Inc. (BIVV) and Celgene Corp.‘s (CELG) $9.7 billion agreement to buy Juno Therapeutics Inc.

Technology M&A has been very active since 2014, a trend that continued and even intensified last quarter in a flurry of deals led by Microchip Technology Inc.‘s (MCHP) $10.15 billion agreement to buy agreement to buy Microsemi Inc.(MSCC) and MuleSoft Inc.‘s (MULE) $6.5 billion agreement to sell to Salesforce.com Inc. (CRM)

Two sectors did see significant declines in the first quarter. There were 25 real estate deals worth a total of $19 billion, on pace for the worst year there since 2010, a drop due at least in part to the very challenging environment for retail stores. And the oil and gas sector is on pace for its worst year since 2009 despite Concho Resources Inc.‘s (CXO) $9.5 billion agreement to buy RSP Permian Inc. (RSPP)

Nevertheless, the overall deal market remains strong, and March was particularly active, with 10 deals or bids of $5 billion or more involving a U.S. company.

 

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