overview of m&a, 2016

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


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)


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


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


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


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


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


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


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


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%


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


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


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




▪ 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


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


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


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


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%




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


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)


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


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


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%




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


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


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% =


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


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


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


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


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%




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


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%


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%


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


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


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


Average Deal value added1 – Target and acquirer, Percent

Acquirer DVA turned negative - still above long term average; Target DVA close to long-term average



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,%


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.



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

overview of m&a, 2016

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