Continued Trend for Mega Deals – 2016 Tops 2015 in M&As Worldwide

The outgoing year of 2016 has surpassed 2015 in terms of mega deals in mergers and acquisitions (M&As) worldwide. The ZEW-ZEPHYR M&A Volume-per-Deal Index has been climbing to ever greater heights, with the year 2016 surpassing the previous record high of 106 points in March 2016 a further four times and ultimately peaking at 113 points in October 2016 – by far the highest index value since records began. These are the findings of studies carried out by the Centre for European Economic Research (ZEW), Mannheim, on the basis of the Zephyr database of Bureau van Dijk.

The continuing trend for these mega deals is also clear to see from the twelve-month moving average given by the ZEW-ZEPHYR M&A Volume-per-Deal Index. The twelve-month average has been continually on the rise since 2009 and as of November 2016 was at 104 points – also the highest value yet recorded.

One reason for this development are the current waves of consolidation taking place in the media and chemical sectors along with the simultaneous marked reduction in the number of smaller transactions. Indeed, what is particularly noticeable in the developments over the past two years is the continued decline in the number of M&As. The twelve-month moving average number of deals is now at its lowest level since 2004 (as of November 2016).

This stands in contrast to the aggregated financial transaction volume of all effected deals, which, according to the twelve-month moving average of the aggregated transaction volume, is now at its highest since 2008. Among these deals are a considerable number of mega deals. At the final count out of all the deals carried out in 2016, 30 of these had a transaction volume of more than 10 billion euros.

More mega deals lined up for 2017

"The present trend is very unusual, since clusters of mega deals typically go hand in hand with a generally high rate of M&As," says Dr Sven Heim, researcher in the ZEW Research Group "Competition and Regulation". "The fact that some mega deals have not gone through until now, as the current wave of M&As already seems to be subsiding, is at least partly down to the fact that these deals had been waiting approval from regulatory agencies all over the world." These agencies can also impose restrictions or even reject the deals, which has led to companies subsequently setting their sights on "second best" solutions. "Their competitors are also taking longer to react," says Sven Heim. What we can be certain of, according to Heim, is that mega deals will be far from a rare occurrence in 2017.

In the beer industry, Anheuser-Busch's takeover of SABMiller, with a total transaction volume of 112 billion euros, constituted the largest deal since the year 2000 and means that 30 per cent of the world's beer sales will from now on be produced by a single company. Even in this case Anheuser-Busch first had sell off some of SABMiller's European brands such as Pilsener Urquell, Tyskie, Peroni and Grolsch as well as its shares in China Resources Snow Breweries or guarantee jobs in South Africa in order to get around regulatory considerations. The deal was eventually finalized on 11 November 2016 after it had received the necessary approval from 24 different competition authorities.

Another huge merger is also about to go through as soon as it is approved by competition authorities: US telecommunications giant AT&T hopes to expand its area of business by incorporating TV and film giant Time Warner into their company for around 100 billion euros.

About the ZEW-ZEPHYR M&A Index

The ZEW-ZEPHYR M&A Index is calculated monthly by the Centre for European Economic Research (ZEW) and Bureau van Dijk and has been tracking the development of mergers and acquisitions completed worldwide since the beginning of 2003. The ZEW-ZEPHYR M&A Index is based on the number and the volume of global mergers and acquisitions recorded in the ZEPHYR database of Bureau van Dijk. The index uses the monthly rates of change in the relation between volume and number of M&A transactions, which are combined and adjusted for volatility and inflation. If the total transaction volume is attributable to a larger number of transactions within one month, the value of the M&A Index decreases, even though the aggregate transaction value remains unchanged. As a result, the index offers a much more precise picture of the level of worldwide M&A activities than a mere observation of transaction volumes or the number of transactions.

For further information please contact:

Dr. Sven Heim, Phone +49 (0)621/1235-183, E-mail heim@zew.de