M&A at a Glance – 2014 Year-End Roundup

2014 was the best year for M&A activity since the financial crisis, with the volume and number of deals hitting post-2007 highs.  Our year-end figures show a 30.4% increase in global deal volume over 2013 and a 54.5% increase in U.S. deal volume over the same period.  Strength in the strategic deal market drove these gains, particularly in the U.S.  Notably, strategic transaction volume in the U.S. rose 74.7% year-over-year, accounting for 77.7% of all U.S. transactions in 2014 as compared to 68.6% of all U.S. transactions in 2013.  Figure 1.  "Megadeals" also made a comeback in 2014, with the average deal value of the top ten largest U.S. public mergers ballooning to $44.3 billion from $16.7 billion in 2013.  Overall, the average value of U.S. public mergers grew 116.1% as compared to 2013.  Figure 2.

In terms of M&A activity by sector, the top five U.S. target industries by volume consisted of Healthcare, Telecommunications, Computers & Electronics, Utility & Energy and Oil & Gas.  Figure 4.  Germany took a notable lead in investments by volume in U.S. companies, while Canada maintained its lead by number of U.S.-company acquisitions.  Figure 3.  Non-U.S. investments in U.S. companies were particularly strong in 2014, increasing in volume by 93.2% over 2013 and contributing to a 43.1% increase in global crossborder transactions.  Figure 1.

On the U.S. public merger front, there were a few noteworthy observations from 2014:

• Reverse break fees across all deals and for strategic deals decreased to 4.8% from 5.7% and to 4.4% from 5.1%, respectively, in 2014 as compared to 2013.  Reverse break fees in financial buyer transactions were consistently higher than in strategic transactions and increased slightly to 6.6% in 2014 from 6.3% in 2012.  Target break fees have remained consistent throughout the last three years at approximately 3.4%.  Figure 5.
• The percentage of all U.S. public cash-only transactions continued to decline (to 50.6% in 2014 from 67.8% in 2013), falling below historic levels.  Figure 6. 
• In addition, the level of tender offers as a percentage of U.S. public mergers declined to 22.1% in 2014 from 28.1% in 2012, notwithstanding the adoption of a "medium form" merger process pursuant to Section 251(h) of the Delaware General Corporation Law in 2013.  Figure 7.
• As a reflection of the robust M&A market and a possible indicator of sellers' increased use of auctions, the use of go-shop provisions declined by almost one-half to 7.8% in 2014 from 14.4% in 2013.  In particular, there was a significant decrease, over the same period, in the percentage of transactions with go-shops involving strategic buyers, from 9.5% to 4.4%.  Figure 8.
• Finally, the percentage of U.S. public mergers that were hostile or unsolicited was 15.9% in 2014, reflecting a relatively consistent level of such transactions since 2012.  Figure 9.