The start of 2016 has seen a downward trend in M&A activity. Total deal value is down 14% to US$ 682 billion in Q1 compared to the same period last year, with the number of deals standing at 8,462, a decrease of 20%.
Europe was the biggest contributor to global M&A activity, accounting for 2,922 deals and witnessing growth of 11% in deal value. Still, in terms of cumulative deal value, Europe lagged behind the Americas, with the latter accounting for 42% of global M&A market value even after experiencing a decline of 26% in local market size. A key reason for this paradox was the larger average deal size of US$ 120m in the Americas, almost double of that in Europe.
Aditionally, a lot of support for the global M&A market came from Japan, with the country recording triple digit growth (106%) in terms of cumulative deal value.
The Top 5 sectors in descending order of contribution were Industrials, Materials, Tech, Energy and Financial Services. Cumulatively these sectors brought in 4,786 deals and accounted for 65.6% of global M&A market value. Apart from the Financial sector, which witnessed negative 2% growth in value compared to Q1 2015, the other four sectors experienced positive QoQ growth ranging between 16% and 56%. The Materials and Energy sectors observed average deal sizes of about US$ 142m and 135m, respectively, whereas average deal sizes for the other three sectors remained well below the US$ 100m mark.
Competition among players also remained intense with investment banks charging very low advisory fees. US$ 5 billion was the total fee generated by the M&A market in Q1 2016. Average fee for M&A advisory was 1% of the deal value in the US and just over 0.8% in Europe. Fees were as low as 0.2% in Asia Pacific, which contributed more than 27% of global M&A deal value, resulting in a 0.7% fee to transaction value ratio across the globe.
In descending order of contribution to the global M&A market, the top 5 banks were Goldman Sachs, JP Morgan, Credit Suisse, Morgan Stanley, and UBS. Overall, these banks accounted for 99.7% of the M&A transactions taking place in Q1 2016. Goldman Sachs alone was involved in nearly a third of the global M&A market with 56% of its activity concentrated within the North American continent. On the other hand, Credit Suisse and UBS had around 70% of their M&A activity focused in Europe.
Among the top 5, the top three deals originated from Europe (Sygenta AG, Johnson Controls Inc., and London Stock Exchange Group Plc) and had a cumulative deal value of approximately US$ 95 billion.
Sources: Thomson Reuters, Dealogic, Financial Times, Business Insider, Leaders League Analysis