Concentration of Global Mergers and Acquisitions Increases

The trend toward ever larger transactions, seen in the global market for mergers and acquisitions (M&A) since 2014, continues. Whilst the number of transactions has fallen to its lowest level in twelve years, the volume of individual transactions continues to increase. This is the result of recent calculations by the Centre for European Economic Research (ZEW) based on the Zephyr database of Bureau van Dijk (BvD).

This development, which sees fewer deals taking place but record highs in terms of transaction volumes, has led to increasing divergence between the two curves in Figure 1. This is reflected in the currently very high M&A Index shown in Figure 2. Particularly notable is the fact that the aggregated transaction volume has remained constant at an extremely high level since September 2015.

This trend can currently be put down to the low costs involved in refinancing. Businesses are easily able to acquire equivalent capital for their acquisitions from international financial markets. This phenomenon is typical for the maturity phase of the current business cycle during which it is common to find that fewer acquisitions of a greater volume take place. Unlike small and medium-sized enterprises, many large businesses have completed considerable restructuring processes in the past few years and are now once again ready to focus on inorganic growth in the factor market to increase their returns.

Megadeals within several industries

The transactions which took place in February and May of 2016 were particularly large. The largest and third largest transactions seen in 2016 took place in May, and the second and fourth largest transactions were seen in February. The Dutch oil multinational, Royal Dutch Shell, took over its British competitor BG Group for around 60 billion euros in February 2016. February also saw the takeover of Broadcom Ltd. by the US-American producer of semi-conductors, Panovia Ltd., for around 34 billion euros. In line with the general trend in this sector, the largest deal of the year took place in May in the US market for cable network providers. Time Warner Cable was taken over by the US media concern Charter Communications. With a takeover price of 69 billion euros, this was the fourth largest takeover ever registered worldwide. The four mega deals seen in 2016 were complemented by a takeover in the financial market, as the Chinese Cinda Financial Holding took over the Nanyang Commercial Bank based in Hong Kong. 

The sectors concerned by these takeovers – the oil and gas industry, the semi-conductor industry, the cable network market, and financial service providers – exemplify the recent, increased tendency towards consolidation. These large acquisitions may have a signalling effect in each of the sectors concerned, to the effect that further transactions could follow.

ZEW-ZEPHYR M&A Volume-per-Deal Index

The ZEW-ZEPHYR M&A Volume-per-Deal Index is calculated monthly by the Centre for European Economic Research (ZEW) and Bureau van Dijk (BvD) and has been tracking the development of mergers and acquisitions completed worldwide since the beginning of 2003. The ZEW-ZEPHYR M&A Volume-per-Deal Index is based on the number and the volume of global mergers and acquisitions recorded in BvD’s ZEPHYR database. 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 more information please contact

Niklas Dürr, Phone +49(0)621/1235-386, E-mail duerr@zew.de