Strong Year for M&A Sags in Second Half
The flurry of seven U.S. M&A transactions of $1 billion or more announced the week before Christmas was a fitting conclusion to a strong 2018, though it came as both private equity activity and strategic M&A have cooled. Through Dec. 19, there were 1,032 U.S. domestic M&A deals of $100 million or more worth a combined $1.4 trillion, according to Dealogic, the source for all figures in this article. That’s the best year since 2015 and one of the best ever. In the same period, there were 83 buyouts of $100 million or more worth a combined $117 billion, a modest drop from 2017 but on par with annual figures over the last five years.
But both M&A and PE activity dipped significantly in the second half of the year. In the first half, there were 49 buyouts worth a total of $83 billion, while the second half saw 34 worth a total of $34 billion, a level less than the comparatively lean years of 2010 and 2011. Even in the summer, PE professionals said valuations were full, and volatile debt markets have made large deals much harder to pull off. The PE figures do not include deals without announced values.
On the strategic side, deal volume held steady, with 526 deals of $100 million or more announced in the first half of the year and 506 between July 1 and Dec. 19, but dollar volume fell from $816 billion in the first half to $579 billion in the second, a dip that coincided with a falling stock market. The second half was still on par with 2016 and 2017, but the size of the drop stirred fears that the long M&A bull market may finally be cooling off.
The most important legal development of the fourth quarter was a ruling by Delaware Vice Chancellor J. Travis Laster that allowed Fresenius Kabi AG to walk from its $4.75 billion agreement to buy generic pharmaceutical manufacturer Akorn Inc., a ruling upheld by the Delaware Supreme Court. Laster’s ruling is the most important in at least a decade on when a target has suffered a material adverse effect that allows a buyer to abandon a deal, and the opinion’s 246 pages will provide plenty for M&A lawyers to mull over.