Global Overview of the M&A Markets

Gregg R. Lemkau
Co-Head of Global M&A
March 1, 2016

M&A Activity in 2015 at Record Levels

Mergers Set a Record as Firms Bulk Up
Subdued for years after the financial crisis, merger and
acquisitions came roaring back as companies seek to boost
revenue at a time when sluggish economic growth and low
inflation make that difficult.
The Wall Street Journal, December 21, 2015

Merger and Acquisition Activity

Hits Record High in 2015

Cheap debt and investor pressure to outrun a

slowing economy pushed companies decisions
to consolidate in the year.
The Wall Street Journal, December 6, 2015

Mergers Hit Nine-Year High in 2015

Of the top five months on record for global M&A volume,

three are from 2015: November, October and July.
JOC.com, January 5, 2016

Global M&A Activity in

2015Highest Ever
Both the U.S. and Asia recorded their highest
M&A values, and two of the only six deals ever
valued at over $100 billion were announced in
2015.
International Business Times, January 8, 2016

2015: A Merger Bonanza

The year stands out, not just for the total value
of the deals but for the number of so-called
mega-deals Thomson Reuters counted 137
mega-deals last year, which accounted for 52
percent of the years overall M&A value.
The Atlantic, January 9, 2016

M&A Volumes Over Time

($ in trillions)

$4.7
$60

$4.1

26%

Global Announced M&A Volume ($tn)

$4.0

$3.2
11%

$3.0

$0.9
11%
28%

$1.1

10%

30%

15%

37%

$1.7

7%

14%

28%

9%

59%

33%

52%

$3.3
$2.9
38%

36%

16%

15%

17%

$2.4
$2.0

37%

40%

38%

45%

2002

2003

$2.5

$2.5

22%

19%

28%

31%

49%

25%

24%

$20

53%

46%

50%
40%

48%

48%

$40

$30

23%

22%

19%

$2.3

28%

47%

44%

24%

26%

37%

52%

64%

23%

$1.3

40%

65%
62%

13%

$1.2
71%

$50

$1.9

$1.6

28%

14%

13%

24%

$2.0

$1.0

$3.4

$2.7

$2.5
5%

$3.6

47%

48%

47%

51%

2010

2011

2012

2013

$10

$0.0

$0

1995

1996

1997

1998

1999

2000

Americas

2001

Europe

2004
Asia

2005

2006

2007

2008

2009

2014

2015

Global Average Annual Equity Market Cap

Source: Thomson Reuters

Key Drivers Have Been in Place...Why Now?

2009 - 2013

2014 - 2015

Limited organic growth opportunities

Low interest rate environment
Availability of financing
CEO/Board confidence
Positive shareholder receptivity to acquirors
Industry consolidation and sense of urgency

Characteristics of the M&A Boom

#1

Return of the Strategic Acquiror

#2

Prevalence of Large Transactions

#3

Positive Shareholder Receptivity

#1

Return of the Strategic Acquiror

2%

2%
6%
3%
1%

23%

8%

2%

15%

24%

72%
42%

2012

2015

Corporate / Corporate

Divestiture - Corporate Buyer

Divestiture - LBO Buyer

Public to Private

Spinoff

Other

Source: Thomson Reuters. Based on $ volumes of U.S. targeted deals >$1 billion. Other includes negotiated share repurchases and rescues.

#2

Prevalence of Large Transactions

12%
28%

9%
8%

13%
30%

10%

22%

12%

8%
29%

19%

2012
<$500m

$500mm - $1bn

2015
$1bn - $5bn

$5bn - $10bn

$10bn - $20bn

$20bn+

Source: Thomson Reuters based on $ volumes

#3

Positive Shareholder Receptivity

One-Day Indexed Stock Price Reaction for Buyers

One Day Stock Price Reaction

6.0 %

4.9 %

4.0 %

3.9 %

3.3%
2.0%

1.5%

2.0 %

1.8%
0.3 %

0.0 %
(0.3)%

(0.5)%

(2.0)%
(4.0)%

(1.6)%
2010

2011

2012

2013

2014

2015

Q1 '15

Q2 '15

Q3 '15

Q4 '15

One-Week Indexed Stock Price Reaction for Buyers

5.9 %

One Week Stock Price Reaction

6.0 %

4.5 %
3.5 %

4.0 %

2.3 %

1.8 %

2.0 %

1.7 %

0.4 %
0.0 %
(0.5)%

(0.9)%

(2.0)%
(4.0)%

2010

2011

2012

2013

2014

2015

Q1 '15

Q2 '15

Q3 '15

(1.3)%

Q4 '15

Source: Bloomberg, Thomson Reuters, Capital IQ

Note: 1) Deals with transaction value greater than $1,000mm with a public acquiror and a North American acquiror or target. 2) One day indexed stock price reaction measured as the
change from the undisturbed date to one day post announcement relative to the S&P 500s change over the same period. 3) All data adjusted to exclude statistical outliers.

What Is Next for M&A

Fundamental Drivers of Activity

Persist

Global Macro Risks

Industry Consolidation Pressures

Volatile Equity Markets

Chinese Outbound M&A Wave

Reduced CEO Confidence

Private Equity Dry Powder

Regulatory Scrutiny Increasing

Activism Pressures

Struggles for Repeat Acquirers

REASONS FOR HOPE

REASONS FOR CAUTION