overview of m&a, 2016
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WORKING DRAFTLast Modified 3/31/2017 10:46 AM Eastern Standard TimePrinted 3/31/2017 10:45 AM Eastern Standard Time
Copyright © McKinsey & Company
Overview of M&A, 2016
MARCH 2017
Michael ParkAndy West
Peter KenevenJan Krause
2Copyright © McKinsey & Company
Description of this report
This update, covering the full year of 2016, is based on publicly available information. The public databases used to drive the content of the report have not been subject verified by McKinsey & Company.
We present no opinions or forecasts on whether the deal activity is positive or value creating, but merely presents the key facts of the transaction activity.
3Copyright © McKinsey & Company 3McKinsey & Company
Contents: Year 2016 in M&A
Key facts on global M&A
Regional and cross-border M&A activity
PE and hostile deals
Key findings from “value creation in M&A” initiative
4Copyright © McKinsey & Company
Key insights on global M&A activity in 2016
Global M&A activity declined vs 2015
Also adjusting for increase in market capitalization, M&Aactivity declined, ending below long term average8
Corporate M&AActivity still represented majority of the total activity at ~90% of overall M&Aactivity
All regions fell in absolute terms in 2016, with Americas still the most active region (50% of total activity) followed by EMEA at 26%
In 2015, global M&Aactivity ended close to ~$3.8 trillion, falling from 2015 level both in absolute value (-17%) and in number of deal (-5%)
Value of megadeals (greater than $10 bn) saw a significant decrease (-40%) from 2015 level and also its share of global M&Aactivity fell from 34% to 25%
In 2016, the share of TMTand Industrial sectors together represented more than a third of total M&Aactivity globally; Healthcare activity declined
Majority deals were financed by cash alone (44%), with equity only as the least preferred (25%)
Premiums paid in 2016 were higher than in 2014 and 2015; 1 week median premiums increased to 32% vs 29% in 2015
Global activity grew in Q4 2016 vs. previous quarter (+46% in terms of value) but fell vs Q4 2015 (-7% of volumes)
5Copyright © McKinsey & Company
Global M&A market, 2008-16Announced deals1
1 Includes deals more than $25mn in deal value only
SOURCE: Dealogic
$3,044 -32%
3,500
2,000500
1,000
0
6,000
10,000
12,000
8,0003,000
0
1,500
2,000
2,500
4,000
4,000
4,500
5,000
2009
$ 2,068
2008
$ 3,044
20112010 2012
$ 2,637 $ 2,505
$ 3,778
20152013
$ 2,674
2014
$ 3,513
2016
$ 4,561
$ 2,494
$2,068 -32%
$2,494 21%
$2,637 6%
$2,505 -5%
$2,674 7%
$3,513 31%
$4,561 30%
Deal value (bn)% change
Number of deals% change
Average deal value (mn)% change
$3,778 -17%
8,156 -18%
5,668 -31%
7,194 27%
7,616 6%
7,333 -4%
6,961-5%
7,617 9%
8,445 11%
8,057 -5%
$373 -18%
$365 -2%
$347 -5%
$346 0%
$342 -1%
$384 12%
$461 20%
$540 17%
$469-13%
Number of dealsValue, $ bn
▪ In 2016, global M&Aactivity decreased from 2015 level(-17%), to less than$4 trillion the level close to 2014
▪ Although number of deals only decreased slightly by 5% vs. 2015
▪ Average deal size decreased by 13% (almost the same value as in 2014)
▪ Relative lack of big deals led to the fall in deal value in 2016
6Copyright © McKinsey & Company
Adjusting for increase in market capitalization, M&A activity declined in 2016 below long term averageAnnualized global M&A volume1 as % of global market cap2
1 Announced deals (not withdrawn), includes deals more than $25mn only, total deal value excluding debt2 Market cap of world-DS market index defined by datastream3 Excludes PE, sovereign wealth funds, other investment funds
SOURCE: Datastream; Dealogic
0
9
6
7
8
5
12
11
10
01 1312971996 2000 1511100698 02 0705 08 201603 090499 14
Corporate acquirers3 Total M&A 20-year average
6.5
7.2
Corporate M&A as share of global market cap rose steeply in 2015
Previous M&A downturn much deeper, but short
PE boom main driver of increase in M&A in 2004-07
7Copyright © McKinsey & Company
Global Corporate and Private Equity M&A, 2008- 2016
1 Announced deals (not withdrawn), includes deals above $25mn only
SOURCE: Dealogic
Global PE M&A volume
Global Corporate M&A volume
Value1, $ bn
Value1, $ bn
3,968
2,3544,000
6,000
0
3,000
4,000
2,000
2,000
8,000
1,000
02011 2012
$2,237
2013 2014 2015
3,093
2016
3,370
$1,957
2009
$2,334$2,245
2010
$2,816
2008
420320268303249110228
1,000
400
800600
0
2,000
1,500
1,000
2000
500
2009 2010 20112008 20162015
593
201420132012
407
Number of deals
Number of deals
Comments
▪ Corporate/Strategic acquisitions still account for majority of deal activity
▪ Corporate volumes showed a decline in 2016 ($3.4 tn) vs. 2015 ($4.0 tn)
▪ Average corporate deal size in 2016 was $457 mn, lower than the 2015 average of $520 mn
▪ PE volumes low in 2016 (~$400 bn) vs 2015 when they were close to $600 bn
▪ Average PE deal size in in 2016 was $601 mn, lower than the 2015 average of $732 mn but higher than 2014 levels of ~$500 mn
8Copyright © McKinsey & Company
Global M&A deals by region and size, 2012-16
1 Includes deals more than $25mn only
SOURCE: Dealogic
$1,182 (26%)APAC
EMEA
$3,778
$906 (24%)
$1,891 (50%)
$981 (26%)
$4,561
Americas
$3,513
$808 (23%)
$1,735 (49%)
$2,505
$1,063 (23%)
$1,237 (49%)
$761 (30%)
$970 (28%)
$507 (20%)
$1,297 (48%)
$572 (21%)
$805 (30%)$2,674
$2,316 (51%)
Number of deals per size bracket
$822 (37%)
$1bn-$10bn
<$1bn
>$10bn
$1,702 (37%)
2016
$3,777
$1,571 (42%)
$940 (25%)
$1,266 (34%)
2015
$4,562
$1,316 (29%)
2012
$2,674 $826 (24%)
$345 (14%)
$1,120 (42%)$1,096 (44%)
2014
$1,468 (42%)
$2,505
$1,218 (35%)
$3,513
$1,064 (42%)
$436 (16%)
2013
$1,118 (42%)
$1,543 (34%)
Value1, $ bn, % of total
Deals by sizeValue1, $ bn, % of total
Deals by geography ▪ All regions saw a drop in activity in absolute deal value terms in 2016; fall of 18% in Americas, 23% in Asia-Pacific and 8% in EMEA in 2016 versus 2015
▪ Breakdown by regions in 2016 saw a slight decrease for Americas (50% vs 51%) and APAC (24% vs 26%) but an increase in EMEA(26% vs 23%)
▪ Value of megadeals (greater than $10 bn) saw a significant decrease (-40%) from 2015 level and also its share of global M&A activity fell from 34% to 25%
▪ Total value of midsize and small size (lower than $1 bn) deals slightly decreased respectively by (8%) and by (4%) vs. 2015
17 18 35 58 35>$10bn465 481 570 647 598$1bn-$10bn
6,851 6,462 7,012 7,742 7,420<$1bn
9Copyright © McKinsey & Company
Cash financing was a preferred financing method in 2016 globally
1 Top 100 announced deals (not withdrawn) globally and top 50 in EMEA/APAC with details provided for financing means: EMEA/APAC refers to EMEA/APAC target2 For several top 100/top 50 deals, information on financing not available
SOURCE: Dealogic
Top deals1, $ bn, %
33% 42% 51% 58%32%
21% 17%17% 16% 21%
25%
57% 50% 41% 32% 21%44%
22%
794 113918921093674 703
36% 41% 42% 60%14% 19%
29%
79%50% 54% 39% 28%
62%
9%
450 378
12%
330
8%
5%
13%
233 279 256
Top 100 global deals by financing means available2
Top 50 EMEAdeals by financing means available2
Top 50 APAC deals by financing means available2 15% 32% 31% 35% 24%
66% 67% 58% 52% 43% 52%
23%22%18%17%16%18%
197 222
2015 2016
381
20142013
10%2012
160 140
2011
166
EquityCash Mix equity/ cash
▪ Deals financed by cash represented the main financing method (44%)
▪ Equity only continues to remain least preferred method of payment globally
▪ Mix equity/cash deals fell as compared with 2015
▪ Share of deals financed by cash increased significantly during 2016 (62%); highest level in the past 5 years
▪ Share of deals financed by mix equity/cash decreased by 51 percent points
▪ Cash-only continues to be most preferred method representing 52% of deals
▪ Share of deals financed by equity fell be 11 percent points
10Copyright © McKinsey & Company
TMT and Industrials together represent more than a third of total M&A activity globally
SOURCE: Dealogic
TMT
Energy & Utility
Consumer & Retail
Real Estate & Construction
TTL
100% =
Healthcare
Financial Services
Industry & Others
260(7%)
2015
532(12%)
217(5%)
285(6%)
556(12%)
3,513
1,007(22%)
106(3%)
4,562
519(11%)
505(13%)
2016
Basic Materials
766(20%)
372(10%)
482(13%)
368(10%)
313(8%)
3,777
304(8%)
302(8%)Oil & Gas
185(7%)
164(7%)
281(11%)
367(15%)
290(12%)
438(12%)
279(6%)
151(3%)
488(11%)
631(18%)
372(11%)
2014
542(15%)
246(7%)
254(7%)
254(9%)
144(5%)
286(8%)
110(4%)
109(3%)
2,505
350(10%)
368(15%)
259(10%)
526(12%)
304(12%)
155(6%)
134(5%)
2012
560(21%)
2,674
205(8%)
420(16%)
191(7%)
290(11%)
270(10%)
285(8%)
2013
232(9%)
Global M&A deals by sector, 2012-16Value1, $ bn, % of total
▪ In 2016, the share of TMT slightly declined but still represents ~20% of total M&Aactivity globally
▪ Activity in Energy & Utility and TTL almost doubled after reporting declines for last 2 years
▪ Healthcare declined by 44% vs 2015; sector one of the biggest decline
11Copyright © McKinsey & Company
Premiums paid saw an uptick in 2016 when compared with premiums in 2014 and 2015
SOURCE: Dealogic
Note: Based on selected deals announced in 2016, N = 371. Only includes 100% acquisitions, excludes negative premiums and deals where target price was clearly affected by rumors, etc.
Percent
45
1616139
10%-20% 30%-40%20%-30% >40%0%-10%
Comparison of region-wise median premiums (FY 2016), Percent
Distribution of one-month premiums(FY 2016), Percent
2427
39
37
2832
One week
One month
3128
26
3229
27
38
3228
One-day premium
One-week premium
One-month premium
Median premium paid in 2014-16
APAC
EMEA
Americas
FY’15’14 ‘16
FY FYFY’15’14 ‘16
FY FYFY’15’14 ‘16
FY FY
12Copyright © McKinsey & Company 12McKinsey & Company
Contents: Year 2016 in M&A
Key facts on global M&A
Regional and cross-border M&A activity
PE and hostile deals
Key findings from “value creation in M&A” initiative
13Copyright © McKinsey & Company
Key insights on regional and cross-border M&A activity, 2016
Cross-border M&A activity
Europe and Africa
Americas
APAC
▪ APAC activity also decreased during 2016 in deal value (-23%) and number of deals slightly falling (-0%), with region’s contribution to total activity remaining stable at 24%
▪ Most of the decrease can be attributed to China/HK/Taiwan region▪ In 2016, deal activity in APAC decreased across all sectors; TMT, Real estate / construction and CPG together
contributed more than 50% of the total activity in APAC
▪ Activity in Americas region decreased by 18% during 2016; share of global activity was about 50%, making it the most active region for the 8th year in a row
▪ United States alone contributed to the fall in Americas activity during 2016, while rest of North America and Latin America showed an increase
▪ During 2016, TMT and Energy contributed to nearly 40% of the total activity in Americas, while Healthcare showed a steep decline (-55%) compared to 2015
▪ M&A activity in EMEA region fell in 2016 in both absolute value (-8%) and number of deals (-4%)▪ EMEA region represented 26% of global activity in 2016▪ UK/Ireland is the most active region in EMEA, with a share of about 23%, while activity in Germany/Swi/Aut was a close
second at 20% share▪ Deal activity in Africa increased significantly by 77% in 2016 at $46 bn, with South Africa’s share of M&A activity in
Africa remains high at ~55%▪ During 2016, TMT and Industry sectors continued to remain significant in activity contributing ~40% of the total activity;
TMT grew by +29% in absolute value terms
▪ Share of cross regional M&A increased to 24% 2016 vs. 17% in 2015▪ Domestic deal activity still contributed the most at 63% but its share has been falling since 2013. from 73% in 2013 to
69% in 2014 and 2015▪ Cross border activity fell slightly from 14% to 12%
14Copyright © McKinsey & Company
Cross-border M&A activity: Past 4 years
14%24%
4561
73%
3513
14%
63%
17%
69%Domestic
Cross-border within region
Cross-regional2
3777
69%
12%17%
2674
12%15%
30% 37%28% 23%
29%53% 47% 33% 36%
18%18%
45%
970 805
DomesticCross-regional2
981
Cross-border in region
1063
78% 81% 83% 80%
9%11% 12%
1182
FY 2016
8%
Domestic
906
Cross-regional2
FY 2015
Cross-border in region 8%
808572
8%12%
FY 2014FY 2013
10%
1 Includes deals above $25mn only2 Intercontinental deals between EMEA, Americas, and APAC
SOURCE: Dealogic
Cross-border dealsValue1, $ bn, % of total
6%7%17%
78%77%
10%
83% 70%
6%16%
1297 1735 2316
Domestic
Cross-border within region
Cross-regional2
1891
9%21%
Global
EMEA
Asia-Pacific
Americas
▪ Domestic deal activity dropped by 26% in 2016 vs. 2015 contributing to 80% of the total deal activity as compared with 43% in 2015
▪ Cross-regional activity fell by 24% while cross-border activity grew by 5% in absolute terms
▪ Domestic deal activity remained stable in 2016 contributing to 36% of the total deal activity as compared with 33% in 2015
▪ Cross-regional activity grew in absolute and relative terms to make up almost a half of all activity, while cross-border activity fell by 55% in absolute terms and lost 19% percent points
▪ Share of domestic deal fell in Americas▪ In absolute terms, cross-border within region
increased by 29% vs 2015, followed by cross-regional (9%), while domestic activity fell by 27%
▪ Share of domestic deal, cross-regional and cross-border M&A significantly changed in 2016 vs 2014
▪ Cross-regional activity increased by 19%, while cross-border and domestic activity fell by 28% and 24% respectively
15Copyright © McKinsey & Company
Cross-regional M&A in 2016: Global deal flows
SOURCE: Dealogic
1 Includes deals above $25mn only
Asia-PacificAmericas EMEA
Announced deals1
Net inflows$ bn
EMEA157
Americas120
Asia- Pacific-276
APAC->Americas$149 bn (79%)228 deals (14%)
Americas->APAC$39 bn (-19%)90 deals (-7%)
EMEA->EMEA$535bn (-29%)1,507 deals (-4%)
EMEA->Americas$257 bn (-11%)232 deals (-4%)
Americas->Americas$1,485bn (-24%)2,066 deals (-13%)
APAC->EMEA$199 bn (111%)275 deals (38%)
APAC->APAC$834bn (-23%)3,318 deals (-0.1%)
Americas->EMEA$247 bn (15%)261 deals (-28%)
EMEA->APAC$32 bn (-30%)75 deals (-10%)
( ) Change vs. 2015
16Copyright © McKinsey & Company
EMEA M&A market, 2008-16
SOURCE: Dealogic
1 EMEA targets, deals more than $25mn only
Value$ bn
Number of deals
Announced deals1
688-47%
1,811 -42%
380
-10%
79916%
2,138 18%
374
-2%
8273%
2,264 6%
365
-2%
761-8%
2,003 -12%
380
4%
8056%
1,813 -9%
444
17%
97020%
2,047 13%
474
7%
1,06310%
2,131 4%
499
5%
1,000
1,400 4,000
3,000
2,000
0
1,200
400
1,000
600
200
0
800 $ 688
$ 1,309
2008 2014
$ 970
20132011
$ 1,063
$ 805
2012
$ 761
20152010
$ 827
$ 981
$ 799
2009 2016
Deal value (bn)% change
Number of deals% change
Average deal value (mn)% change
▪ M&A activity in EMEAregion fell in 2016 (-8%)
▪ In 2016 number of deals fell by 4%, resulting in an average deal value fall of 4%
– EMEA region had 26% of global activity in 2016
– Was second most active region after the Americas981
-8%
2,043-4%
480
-4%
1,309
3,105
422
17Copyright © McKinsey & Company
UK/Ireland is the most active region in EMEA; Ger/Swi/Aut were a close second
SOURCE: Dealogic
1 Includes deals more than $25mn only; 2 Numbers don’t add up to total deal volume because of exclusion of a few countries
74
170
118
99
45
72
66
81
60
43 80
146123
46 71
70 48
76
7365
53 54
8048
64
46
58
5488
75
35805
121(15%)
2013
32
244(25%)
445(42%)
31
104(10%)
2014
970
165(17%)
39
168(21%)
2012
38
143(19%)
150(20%)
40
39
76133
40
230(23%)
BeNeLux
Russia/EE
France
Middle East & Africa
Iberia
ItalyScandinavia
2016
Rest of Europe
UK/Ireland
Ger/Swi/AT
981
197(20%)
40
2015
1,063
EMEA deals by geographyAnnounced deals1
$ bn
▪ UK/Ireland is the most active region in EMEA, with 23% share of deal activity; although it saw a significant fall as compared to 2015 when it was about 42% of the total activity
▪ Ger/Swi/Aut saw an increased share to 20% from 10% in 2015
18Copyright © McKinsey & Company
TMT, Industrial and real estate represented more than 50% of total deal activity in EMEA in 2016
SOURCE: Dealogic
TTL
Industry and others
TMT
100% =
Financial Services
Consumer and retail
Healthcare
Real Estate/Construction
Basic Materials
212(22%)
Energy & Utility
175(18%)
2016
133(14%)
2013
66(7%)
23(2%)
2015
164(15%)
59(6%)
1,063
100(9%)
145(14%)
131(12%)
139(13%)
81(8%)
225(21%)
51(5%)
27(3%)
65(8%)
183(19%)
761
84(11%)
170(22%)
76(8%)
120(12%)
56(6%)
2014
86(9%)
156(19%)
822
212(22%)
108(11%)
96(10%)
111(14%)
132(16%)
134(17%)
43(5%)
62(8%)
805
65(8%)
32(3%)
112(11%)
38(5%)
2012
87(11%)
91(12%)
34(5%)
40(5%)
108(14%)
65(8%)
83(11%)
981
127(13%)
73(7%)
EMEA M&A deals by sector, 2012-16Value1, $ bn, % of total
▪ During 2016, TMT and Industry showed a significant increase in activity
▪ TMT, Industry and real estate represented more than 50% of total deal activity in EMEA
▪ Consumer and retail showed a sharp decline compared to 2015
19Copyright © McKinsey & Company
Deal activity in Africa increased significantly in 2016 after witnessing a drop in 2015; with South Africa bouncing back
SOURCE: Dealogic
1 Announced deals above $ 25 Mn (excluding withdrawn or cancelled deals) for target region Africa
46
2133
11
14
43
10
51
32
36
11
25
46
+66%
201615
26
1521
21
1312
23
11
33
15
17
2010
19
+77%
African deal volumeAggregate deal value$ bn
Other Africa South Africa
▪ Deal activity in Africa increased by a significant 77% in 2016 when compared to 2015
▪ South Africa’s share of M&A activity in Africa remains high at ~55%
▪ Other major countries were Egypt, Morocco and Congo with a combined ~$10.8 bnof M&A activity in 2016
20Copyright © McKinsey & Company
Americas M&A market, 2008-16
SOURCE: Dealogic
1 Targets based in Americas region, deals more than $25mn only
0
2,400 3,000
1,000
2,000
0
1,200
600
1,800
300
2,100
900
1,500
$ 889
2009
$ 1,197
2008
$ 1,237$ 1,216
20112010
$ 1,118
$ 2,316
2014 2015
$ 1,735
2013 2016
$ 1,891
2012
$ 1,297
1,197
2,337
512
889 -26%
1,607 -31%
553
8%
1,118 26%
2,430 51%
460
-17%
1,216 9%
2,599 7%
468
2%
1,237 2%
2,805 8%
441
-6%
1,297 5%
2,573 -8%
504
14%
1,735 34%
2,732 6%
635
26%
2,316 33%
2,813 3%
823
30%
1,891 -18%
2,526 -10%
749
-9%
Deal value (bn)% change
Number of deals% change
Average deal value (mn)% change
Announced deals1
▪ Activity in Americas region decreased by 18% during 2016 vs 2015
▪ Number of deals also fell by -10% vs. 2015, resulting in decrease of average deal value (-9% vs 2015)
▪ Americas region’s share of global activity remained at about 50%, making it the most active region for 8 years in a row
Value$ bn
Number of deals
21Copyright © McKinsey & Company
Americas deals by geographyAnnounced deals1
$ bn
Americas M&A deals by country/region, 2010-16
SOURCE: Dealogic
1 Includes deals more than $25mn only
2,316
1,735121
2016
1,891
1,713
86
89
14
1,488
127
2010
778
94
12
89
-20%
2,147
1511
1,2161,297
87
975
145149
940
96
13
1,2371,118
246
118149
83
1,092
Rest of NorthAm USLatam (incl. Caribbean)
▪ United States saw a decline (-20%) in M&Aactivity during 2016; 91% of Americas activity was in US
▪ Rest of North America and Latin America both showed a a slight increase in activity
▪ Latin America increased its incidence to 5% share (higher than last year)
22Copyright © McKinsey & Company
Americas M&A deals by sector, 2012-16
SOURCE: Dealogic
Sector shares
Energy & Utility
100% =
TMT
235(12%)
2,316
235(10%)
445(19%)
233(10%)
169(9%)
74(3%)
191(8%)
86(4%)
200(11%)
355(20%)
2014
226(10%)
337(19%)
158(9%)
34(2%)
220(9%)
822
2015
608(26%)
182(10%)
165(9%)
112(6%)
2012
199(16%)
135(11%)
124(10%)
161(13%)
34(3%)
44(3%)
162(13%)
151(9%)
65(5%)
2013
163(9%)
84(6%)
111(6%)
205(16%)
1,237
135(10%)
336(19%)
81(5%)
1,297
211(16%)
335(26%)
58(5%)
72(6%)
290(23%)
114(9%)
108(9%)
41(3%)
TTL
Basic Materials
Industry and others
1,891
Healthcare
410(22%)
385(20%)
Financial Services
Consumer and retail
2016
Real Estate/Construction
Announced deals1, $ bn
▪ During 2016, Energy and Utility (incl. Oil & Gas) showed a significant uptick in activity (75% increase vs 2015)
▪ TMT contributed to nearly 20% of the total activity n Americas (a significant fall when compared with 2015 activity)
▪ Healthcare sector declined by more than 50% to $200 Bn from $445 Bn in 2015
23Copyright © McKinsey & Company
APAC M&A market, 2008-16
SOURCE: Dealogic
1 APAC targets, deals more than $25mn only
600
800
400
0
200
3,000
2,000
1,000
0
1,200
1,000
4,000
2016
$ 906
$ 1,182
20152014
$ 808
2009 20132008
$ 577$ 491
20122010
$ 507$ 572
2011
$ 593$ 539
539
2,714
199
491 -9%
2,250 -17%
218 10%
577 17%
2,626 17%220 1%
593 3%
2,753 5%216 -2%
507 -14%
2,525 -8%201 -7%
572 13%
2,575 2%222 11%
808 41%
2,838 10%285
28%
1,182 46%
3,501 23%338
19%
906 -23%
3,488 0%260
-23%
Deal value (bn)% change
Number of deals% change
Average deal value (mn)% change
Value$ bn
Number of deals
Announced deals1
▪ APAC saw a decreased activity during 2016 in deal value by -23%; number of deals remained almost constant
▪ Average deal size decreased by (-23%) to ~$260 mn
▪ In 2016, APAC’s contribution to total activity was 24% in line with the past two years
24Copyright © McKinsey & Company
APAC M&A deals by country/region, 2012-16
SOURCE: Dealogic
1 Includes deals more than $25mn only, APAC targets
Australia/NZJapan
China (incl. HK & Taiwan)
Rest of APACIndiaSouth Korea
2016
90
82(10%)
1,182
84(15%)
808
105(12%)
72
457(57%)
2015
47
49(5%)
785(66%)
94(10%)
80
93(8%)
103
64
518(57%)
60
906
2014
695375
2013
572
247(43%)
507
7985
75(15%)
85
2012
83
2948
185(36%)
4337
APAC deals by geographyAnnounced deals1
$ bn
▪ Most of the APAC activity was driven by China/HK/ Taiwan region
▪ Developed APAC contributed 27% to total APAC M&A activity
▪ Australia/NZ saw a slight uptick in activity when compared with 2015
25Copyright © McKinsey & Company
APAC M&A deals by sector, 2012-16
SOURCE: Dealogic
2012
507
51(10%)
62(12%)
38(7%)
82(16%)
118(10%)
96(11%)
78(9%)
2015
94(10%)
68(8%)
55(6%)
1,182
106(13%)
202(17%)
235(20%)
60(5%)81
(7%)
193(16%)
118(10%)
125(11%)
822
2014
179(22%)
110(14%)
50(4%)
15(3%)
61(12%)
Consumer and retail
906
Energy & Utility
185(20%)
169(19%)
113(12%)
Healthcare
Financial Services
Basic Materials
2016
Industry and others
91(11%)
117(14%)
78(10%)
67(8%)
TTL
100% =
Real Estate/Construction
TMT
56(10%)
43(8%)
79(14%)
146(26%)
48(5%)
63(11%)
54(9%)
26(3%)
33(4%)
572
2013
69(12%)
79(16%)
29(6%)
65(13%)
64(13%)
23(4%)
Announced deals1, $ bnSector shares
▪ In 2015, deal activity in APAC decreased across all sectors
▪ TMT showed a slight increase in activity, but gained 3percent points in terms of relative incidence
▪ TMT, Real estate / construction together contributed to nearly 40% of the total activity in APAC
26Copyright © McKinsey & Company
M&A activity in China
1 Inflow: local target acquired by foreign companies; outflow: local companies acquiring targets abroad.2 Announced deals (not withdrawn), includes deals of more than $25 mn only. Chinese targets
SOURCE: Dealogic
M&A activity in China heated up in the past 3 years – in particular, outbound activity
Aggregate deal value, $ bn2
15
37
2016
-224
34
-98
2010 13
22
45
-52
12
-56
27
-48
14
29
-70-65
11
38
1,029 1,034 932 2,0571,083 1,318 1,988
xx Number of deals Inflow Outflow
M&A inflow1 and outflow1, $ bn2
167
12
418
215
482+53%
+95%
158
11 15
640
201614132010
158
▪ Chinese M&A volume increased during 2015, and reached its highest level in the last 6 years; 2016 saw lower activity
▪ Outbound M&A continued to grow even stronger in 2016 to 7 times inbound activity
▪ ChemChina’sannouncement to acquire Syngenta for ~$43bn was the largest Chinese outbound deal of 2016
27Copyright © McKinsey & Company 27McKinsey & Company
Contents: Year 2016 in M&A
Key facts on global M&A
Regional and cross-border M&A activity
PE and hostile deals
Key findings from “value creation in M&A” initiative
28Copyright © McKinsey & Company
Key insights on PE and hostile M&A activity in 2016
PE
Hostile deals
▪ Overall PE activity decreased by -31% vs. 2015 close to ~$400 bn, from ~$600 bn in 2015
▪ America reported a significant fall (-49%), while EMEA remained stable and APAC activity grew by +11%
▪ Overall PE contribution to the global M&A declined slightly to 11%, far from 2006-07 high of ~20%
▪ Hostile M&A deals fell significantly to $262 bn (-57% vs. 2015)back to the post recession levels
▪ Average deal value fell to ~4.3 Bn, almost becoming half of 2015 level
▪ Number of hostile deals slightly fell (-9%) indicating lower number of mega-hostile deals
▪ The incidence of withdrawn deals on hostile deals is more relevant
28McKinsey & Company
29Copyright © McKinsey & Company
PE M&A activity dropped in 2016 on a global basis, driven by the Americas; APAC the only region showing slight growth
1 Announced deals (not withdrawn), includes deals more than $25mn only
SOURCE: Dealogic
Global PE by region (deal value, $ bn1 and proportions )
27%
54%
33%
20142010 2013
12%
39%
58%
13%
39%
15%
35%
407
50%
2015
9%
593
2016
66%
AmericasAPACEMEA
15%34%
14%48%
2009
110
2008
228
50%43%40%
17%
26831%
61%
249
24%
2011
303
48%
420
13%12%
2012
320
% change
▪ Global– APAC– EMEA– Americas
PE activity as share of total M&A activity (%)8%8%6%7%
-52%-38%-60%-46%
5%6%4%5%
125%101%
94%165%
10%11%
7%11%
22%1%
17%32%
11%12%
7%14%
-11%-17%-26%-1%
11%10%
6%13%
19%15%34%13%
12%12%
6%14%
31%46%67%
9%
12%17%
7%12%
41%1%
-12%96%
13%14%
5%17%
-31%11%
0%-49%
11%15%
7%11%
▪ Global– APAC– EMEA– Americas
Comments
▪ Overall PE activity decreased by -31% vs. 2015, falling slightly below 2014 levels
▪ Most of the PE Activity still dominated by the Americas region
▪ Overall PE contribution to the global M&Aremained stable at 11-13%, greater than the lows of single digit 5-8% in the recession period
30Copyright © McKinsey & Company
Hostile M&A deals during period 2008-16Announced hostile deals1
1 Hostile deals (including withdrawn deals) with initial target board attitude as hostile, includes deals more than $25mn only
SOURCE: Dealogic
Value$ bn
Number of deals
490
124
3949
166-66%
84-32%1979-50%
24548%
9918%247925%
186-24%
1045%
1788-28%
116-37%
89-14%1309-27%
15735%
61-31%257397%
662321%
7523%8820
243%
614-7%
67-11%9165
4%
Deal value (bn)% change
Number of deals% change
Average deal value (mn)% change
800 200
100
0
600
200
0
400
2008
$ 490
2012
$ 157
2011
$ 116$ 186
2010
$ 245
2009
$ 166
$ 662
20142013 2015
$ 262
2016
$ 614
The incidence of withdrawn deals on hostile deals is more relevant
▪ Hostile M&A deals continued the trend and fell significantly in 2016
▪ Average deal value remained high at ~4.3 Bn; way lower than 2014-15 levels
262-57%
61-9%
4295-53%
INCLUDING WITHDRAWN DEALS
31Copyright © McKinsey & Company 31McKinsey & Company
Contents: Year 2016 in M&A
Key facts on global M&A
Regional and cross-border M&A activity
PE and hostile deals
Key findings from “value creation in M&A” initiative
32Copyright © McKinsey & Company
Key insights on M&A value creation in 2016
SOURCE: McKinsey; Dealogic; Datastream; company reports 32McKinsey & Company
Deal value creation declined slightly
POP lower than long term average▪ The POP index very slightly increased to 56%, vs. 55% in 2015,
still lower than the long term average of 58%. The pop index is the proportion of acquirers with negative share price impact in a given time period, suggesting investors perceive them to have over-paid.
▪ Deal value added (DVA) declined in 2016 to 8.4% vs. 9.8% in 2015; it is still above the long-term average of 6.7%
▪ Target DVA increased slightly to 10.1% vs. 9.5% in 2015 but still shy of the long term average of 10.2%
▪ Acquirer DVA turned negative from 0.3% in 2015 to -1.7% in 2016
▪ The difference between DVA for cash-and stock-financed deals also increased during 2016, ending at 18.3% spread vs. 14.7% in 2015, higher than long-term average of 13.8%
33Copyright © McKinsey & Company
We analyzed the value creation at M&A deal announcement for around 2,235 transactionsin the past 19 years
SOURCE: Dealogic; McKinsey
Criteria for inclusion
▪ Both the acquirer and target must be listed companies (to capture price change of both at announcement)
▪ Transaction value more than $500mn to ensure relevance and likely liquidity of both company shares
▪ 19-year time frame (1997-2016) to capture transactions in two M&Aboom cycles (and bust in between)
▪ Full (100%) acquisitions only to avoid distortions from partial deals
▪ Target size at least 5% of acquirer value to ensure significance of deal on acquirer share price
▪ Assess whether M&A deals create value for target and acquirer companies at announcement
▪ Review key trends in value creation (e.g., current M&Aboom vs. previous boom)
▪ Are acquirers demonstrating more discipline in overpaying?
Overall goal Resulting sample
▪ 2,235 transactions
▪ Deals announced fromJanuary 1, 1997 toDecember 31, 2016
▪ Total value $12.0 trillion
▪ Average deal size $5.3bn
▪ Split by acquirer region
Number of deals
▪ Americas – 63%
▪ EMEA – 23%
▪ APAC – 14%
34Copyright © McKinsey & Company
Total DVA of 8.4% for 2016 is slightly lower than that of 2015; still higher than the long-term average of 6.7%Average DVA index 2000 – 2016, %
1 For M&A involving publicly traded companies; defined as combined (acquirer and target) change in market capitalization, adjusted for market movements, from two days prior to two days after announcement, as % of transaction value
SOURCE: Dealogic; Datastream; McKinsey
6.7
154133 89 39 49 78 93 206 102106 77 114 98 77 129
200720032002 20112000 2001 2014
4
2012
8
16
-4
12
-8
20160
2015201020082006 200920052004 2013
DVA1
%Number of dealsxx
Average,%
182 154
35Copyright © McKinsey & Company
The POP index rose slightly to 56% in 2016 close to the long term average% of deals with negative abnormal acquirer share price impact
1 Proportion of overpayers
SOURCE: Dealogic; Datastream; McKinsey
2002 2005 2014 201620082003 201030
20122009
40
20152013200720042001 201120062000
70
60
50
80
POP1
%
154133 89 39 49 78 93 206 102106 77 114 98 77 129 182 154
58
Average,%
Number of dealsxx
36Copyright © McKinsey & Company
Average Deal value added1 – Target and acquirer, Percent
Acquirer DVA turned negative - still above long term average; Target DVA close to long-term average
1 For M&A involving publicly traded companies; defined as combined (acquirer and target) change in market capitalization, adjusted for market movements, from two days prior to two days after announcement, as % of transaction value
SOURCE: Dealogic; Datastream; McKinsey
Total DVATarget DVAAcquiror DVA
16
12
8
4
0
-8
-4
-12
-16
-20141312 201611 1502 06 0701 05 0908 10032000 04
10.2
6.7
-3.5
Number of dealsxx
154133 89 39 49 78 93 206 102106 77 114 98 77 129 182 154
Average,%
37Copyright © McKinsey & Company
Average Deal value added1 – Target and acquirer, Percent
The difference in DVA between pure cash and pure stock deals increased to 18%, much higher than long term average difference of 15% pts.
1 For M&A involving publicly traded companies; defined as combined (acquirer and target) change in market capitalization, adjusted for market movements, from two days prior to two days after announcement, as % of transaction value
SOURCE: Dealogic; Datastream; McKinsey
DVA pure stock dealsDVA Total DVA Pure cash deals
-10
20
05
1015
-5
25
30
-1510 20160502 042000 09 1106 1412 151308070301
Average,%
154133 89 39 49 78 93 206 102106 77 114 98 77 129 182 154
14.2
6.7
0.4