The predominance of US-based M&A deal activity has pushed US law firms back into a dominant position in mergermarket’s third quarter M&A value league tables.
Propelled by their roles advising US companies on the spate of deal-making activity in the healthcare and technology sectors, firms like Skadden Arps, Simpson Thacher and Sullivan & Cromwell have come to dominate the global league tables by value.
While US law firms may not have managed to usurp London-based “magic circle” law firms for the very top spots in the European M&A league tables, their prevalence in the top 20 outweighs the limited incursion that UK firms have made into the US M&A league tables by value.
Sola Akinola, head analyst (Americas) at mergermarket, says: “The uncertainty and panic witnessed at the end of last year and during the start of this year has been replaced by a calm, cautious approach. Corporate boards can turn their attention from survival to growth, with acquisitions a strong option to help boost earnings and pipelines.
“A byproduct of the change in mentality is a marked increase in hostile bids as well as contested deals as everyone tries to get their hands on the best assets at the cheapest price.”
This year has so far seen the highest percentage of announced hostile takeover bid values since 2003. Approximately 12 per cent, or USD58.9bn, of total takeover values has been hostile.
In volume terms however, these deals represent only 5.5 per cent, or 32 deals, of the total – an average of USD1.8bn per deal. These numbers seem to indicate a willingness for companies to offer higher premiums due to already depressed prices.
The majority of hostile deals so far this year have taken place in the US, where they account for 18 per cent of total deal value to date. In Europe, hostile bids account for only eight per cent of overall takeovers.
European dealmakers however can usually expect more of a contest when bidding for coveted assets. Over six per cent of all European public takeovers have been contested so far this year, more than double the amount witnessed in the US where less than two per cent of public deals were contested.
Of the 73 hostile US public bids over the last six years, only 14 have been contested while there have been 33 in Europe. The trend is however most vivid when looked at in context of all contested bids (both recommended and hostile) in both regions since 2003. In the US there have been 40 contested bids in total, less than half of the European total of 100 deals – which represents a staggering 45 per cent of global contested takeover bids.
According to mergermarket, although global deal values and volumes are down by 47 per cent and 39 per cent respectively when compared to the same period in 2008 and are at their lowest levels since 2003, the worst seems to be over. Global activity currently stands at 6,294 announced transactions valued at USD1,049.2bn.
In the short term, US-based M&A activity shows the highest potential, driven by a series of high profile deals in the healthcare and technology sectors. So far this year North American values are down 33 per cent year on year at USD493.5bn, while deal volume is down 40 per cent.
Activity in the more depressed European markets – total deal value in Europe is down by a massive 70 per cent and deal volumes by 46 per cent – is focused in more traditional hot spots like energy, mining and utilities, financial services and industrials.
The Asia-Pacific market has taken the smallest hit in M&A activity when compared to last year buoyed by large deals in the energy and financial services sectors. Although the region was not immune to the global slow-down in M&A activity – a 23 per cent and 20 per cent drop in volume and value respectively – this is minor when compared to the diminished numbers in Europe and North America. Activity in the region is expected to remain grounded in the traditional sectors, ICBC’s potential USD547m bid for Thailand’s ACL Bank underlining this fact.