US M&A H1 2016 Report

ISlow but steady: US M&A H1 2016
Despite a slower first half, the underlying
drivers of M&A activity remain strong
Slow but steady:
US M&A H1 2016

The frenzied pace of US M&A in 2014 and 2015 calmed in the
first half of 2016, returning the market to far more sustainable
and familiar activity levels.
A
fter two blockbuster years, the first half of 2016 has brought M&A activity back to normal
levels of activity, with fewer megadeals and generally lower deal values. Although deal
flow is lower than last year, H1 2016 is in line with historically strong M&A trends. The
2,291 deals recorded in the first six months are far ahead of the 1,825 deals recorded in H1 2013.
Economic, regulatory and political uncertainty have all influenced this return to normality.
Economically, US GDP growth is slightly below last year’s 2.4 percent increase, and there is the
specter of rising interest rates on the horizon. Europe’s markets are sluggish, questions continue
as to the pace of China’s economic growth and oil prices remain low. But, overall, the appetite is
still in place and the broader macroeconomic backdrop is amenable for deals.
Regulatory issues have arisen in connection with certain transactions. The Committee on
Foreign Investment in the United States (CFIUS), which reviews transactions that could result in
control of a US business by a foreign person, blocked the sale of a Dutch company’s US-based
lighting division on national security grounds. And several deals are facing tough challenges under
the US government on antitrust grounds.
Politically, it’s been a particularly challenging year, from the ongoing drama of the US
presidential elections to Brexit. The uncertainty resulting from the latter in particular will no doubt
resonate for years to come. While it is difficult to speculate on actual outcomes until negotiations
begin, the stakes are high for US M&A, given the UK’s position as the top target for US buyers,
with 128 deals worth US$20.8 billion.
Yet, despite all of this uncertainty, there are reasons for optimism. The technology, media and
telecommunications (TMT) sector continues to dominate deal flow, accounting for 22 percent
of all transactions, as executives and dealmakers acknowledge the transformative opportunities
presented by tech. Non-tech buyers are also keeping an eye on the nascent fintech industry.
And the pharma, medical and biotech sector (PMB) saw 250 deals, accounting for 11 percent
of deals—including the first half’s two biggest single takeovers: Ireland-registered Shire bought
Baxalta at the start of the year, and Abbot Laboratories acquired St. Jude Medical in April.
Sectors like TMT will no doubt continue to offer new opportunities, even if the wider
geopolitical and macroeconomic picture causes some to look very closely before they leap. More
broadly, the conditions that have driven M&A around the world for the past two years have not
fundamentally changed and so we expect a very busy second half.
John Reiss
Partner, White & Case
Gregory Pryor
Partner, White & Case
Foreword
Slow but steady: US M&A H1 2016

Contents
Slow but steady sets the pace
Page 3
Sector watch: tech, pharma
and energy
Page 9
Fintech: revolution
and regulation
Page 12
US M&A in figures
Page 15
Private equity: searching
for strategies
Page 16
Conclusion: politics, tech
and plenty of capital
Page 18

3Slow but steady: US M&A H1 2016
A
fter a somewhat slow start
to the year, US M&A deal
values were given a major
boost in mid-June 2016 when
Microsoft announced its largest-ever
acquisition: a US$26.2 billion bid for
professional social network LinkedIn.
This was notable not only for the
size of the deal but also because it was
one of so few this year—megadeals
have been thin on the ground in 2016.
The largest H1 deal—pharmaceutical
maker Shire’s US$35.2 billion takeover
of Baxalta—was the only one on a
scale similar to the large transactions
seen in H1 2015, such as Anthem’s
US$54.2 billion agreement to acquire
Cigna, and Charter andTimeWarner’s
US$55 billion deal.
Overall US M&A deal volume
was down 11 percent year-on-year,
from 2,585 in H1 2015 to 2,291
in H1 2016, according to
Mergermarket figures. Aggregate
deal value was down 30 percent,
from US$822 billion in H1 2015
to US$577.2 billion in H1 2016.
This comes against a backdrop
of moderate economic growth, with
the World Bank expecting the US
economy to grow by 1.9 percent this
year (compared to 2.4 percent in
2015), slow employment growth at
mid-year and the political uncertainty
of an election year, as well as the
Brexit vote and its aftermath.
Inbound US M&A volumes began
the year by bucking global trends.
While inbound activity was treading
water elsewhere in the world, the
number of US companies bought
by foreign firms in the first quarter
of 2016 stood at 224, compared with
197 in Q1 2015.
That pace held firm for the
remainder of the first half of the
year, with inbound M&A reaching
448 deals, up from 420 deals in
H1 2015. Inbound deal value in
H1 2016 was subdued, however,
at US$169.3 billion, compared
with US$194.6 billion in H1 2015.
Strategic thinking
According to John Reiss, global head
of M&A atWhite & Case, this is all
just strategic M&A in action: “We
were incredibly busy in the first half
of 2016, even if that seems contrary
to what the data suggests,” says
Reiss. “While we’ve seen value and
volume down this year compared
to 2014 and 2015, if you take it from
post-crisis years, it’s fairly standard.”
Regulatory headwinds have
put a halt to some larger deals.
The collapse of the US$160 billion
Pfizer-Allergan merger, amid a
crackdown on so-called tax inversion
deals, was one of the most high-
profile casualties of this broader trend.
Others that fell by the wayside
included a proposed US$34 billion
acquisition of oilfield services group
Baker Hughes by its rival Halliburton,
blocked by the US Department of
Justice on competition grounds
in April. And CFIUS blocked Asian
investors from acquiring a Dutch
company’s US-based lighting division
on national security grounds.
But there are other factors at play,
according to Reiss. Some buyers
are choosing to take a breather
during the approvals process, rather
than sustain the hectic pace of
M&A witnessed in 2014 and 2015.
HEADLINES
n First half of 2016 shows clear signs of cooling, but there is potential for bigger deals in the second half n US M&A deal volumes are
down 11 percent year-on-year but maintain historically robust levels nValues show a sharper decline, down 30 percent n Regulatory
challenges have put a halt to some larger deals n Canada, the UK and China have been the most active inbound, while the UK and
Canada enjoyed the most outbound activity nTechnology is attracting investor attention—expect future US M&A to focus on this sector
Slow but steady
sets the pace
Total US M&A 2011 – 2016 H1
Numberofdeals
Dealvalue(US$billion)
Volume Value
0
200
400
600
800
1,000
1,200
1,400
1,600
Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1
2011 2012 2013 2014 2015 2016
0
100
200
300
400
500
600
30%
Percentage decline
in US M&A deal
values year-on-year,
from US$822 billion
in H1 2015 to
US$577.2 billion
in H1 2016

4 White & Case
Top ten US M&A deals, H1 2016
US inbound M&A 2011 – H1 2016
Top 10 inbound bidders by deal value, H1 2016
Numberofdeals
Volume Value
2011 2012 2013 2014 2015 2016
0
50
100
150
200
250
300
0
20
40
60
80
100
120
140
160
180
0
10
20
30
40
50
60
SingaporeSwedenSaudi ArabiaLuxembourgUnited
Kingdom
JapanGermanyChinaIreland
(Republic)
Canada
Announced
date
Completed
date
Target company Target dominant sector Target dominant
country
Bidder company Bidder dominant
country
Deal value
US$(m)
11/01/2016 03/06/2016 Baxalta Inc. Medical:
Pharmaceuticals
USA Shire Plc Ireland
(Republic)
35,219
28/04/2016 St. Jude Medical Inc. Medical USA Abbott Laboratories USA 29,850
13/06/2016 LinkedIn Corporation Services (other) USA Microsoft Corporation USA 25,514
25/01/2016 Tyco International plc Industrial products and
services
Ireland
(Republic)
Johnson Controls, Inc. USA 16,166
01/06/2016 13/06/2016 Fortive Corporation Industrial automation USA Danaher Corporation
(Shareholders)
USA 14,807
03/05/2016 IMS Health Holdings, Inc. Services (other) USA QuintilesTransnational
Holdings Inc.
USA 12,912
16/02/2016 02/05/2016 The ADT Corporation Industrial products and
services
USA Apollo Global
Management, LLC
USA 12,269
31/05/2016 Westar Energy Inc. Utilities (other) USA Great Plains Energy Inc. USA 12,117
17/03/2016 01/07/2016 Columbia Pipeline Group,
Inc.
Energy USA TransCanada
Corporation
Canada 12,040
09/02/2016 ITC Holdings Corporation Energy USA Fortis Inc. Canada 11,305

Top outbound targets by value, H1 2016
0
5
10
15
20
25
DenmarkNetherlandsIndiaGermanyTaiwanItalyCanadaFranceIreland
(Republic)
United
Kingdom
“Some of these big deals take
a very long time to approve.You’re not
going to be doing much in the interim.
And after a really lengthy approval
period, you need to digest the results—
all in the context of an unprecedented,
inflammatory, divisive and uncertain
election process,” he says.
That sense of greater uncertainty
is prompting some hesitation in
dealmaking: “In general, people are
viewing this year as more unsettled
than last, and there is a sense that
deal activity is being somewhat
affected because of that,” says Mort
Pierce, a partner at White & Case.
While the Shire-Baxalta
megadeal is largely about the
entities becoming bigger and
more significant in terms of the
marketplace, most recent deals
have been of a much smaller scale.
“If a larger merger makes sense,
they will still pursue it, but the bulk
of the activity is larger companies
looking at smaller companies,
wanting to fill the gaps in products
and markets they don’t currently
have,” says Pierce.
In and out
Inbound deals in H1 were
dominated by Canadian acquirers,
such as Fortis snapping up ITC
Holdings for US$11.3 billion, an
energy sector transaction.Total
Canadian inbound deal values
reached US$50.6 billion, with
73 separate deals.
Inbound Asia deals remain a key
part of the story, with China ranking

6 White & Case
third, racking up US$27.5 billion in
deal value in H1: “Inbound M&A
deals from Asia are still being
made—the Asian powerhouses
such as China and Japan are doing
many deals into the US,” says Reiss.
“Companies from Asia are getting
more comfortable with the US
environment and processes, with
how to come in and buy a company
in the US.”
Outbound deal values reached
US$83.8 billion, headed by the UK
on US$20.8 billion (with 128 deals),
just ahead of Ireland on
US$17.3 billion (though the latter
total is dominated by the acquisition
of Ireland-based Tyco by Johnson
Controls for US$16.17 billion).
Sectors in brief
TMT dominated sector-specific US
M&A deal volumes for the first half
of 2016—with innovative technology
galvanizing buyer interest.
TMT’s continued strength and its
convergence across other sectors is
good news for the M&A market and,
as White & Case’s Reiss points out:
“Success breeds success”.
M&A in the fast-growing tech
sector, he argues, has proven
resilient despite the risk factors
breeding uncertainty in deal markets.
Fluctuations in equity markets and
the increasing difficulty in obtaining
debt do not seem to have affected
global tech sector M&A to any great
extent in 2016.
Technology will affect a broader
range of industries, even the more
Top sectors 2016 H1, by volume
Numberofdeals
0
100
200
300
400
500
600
DefenceAgricultureReal
Estate
TransportConstructionLeisureEnergy,
Mining &
Utilities
Financial
Services
ConsumerPharma,
Medical &
Biotech
Business
Services
Industrials
& Chemicals
TMT
Shareholder activism in 2016
Shareholder activism has become a major talking point in America’s
boardrooms in the past few years. It has been a driver for M&A
and has spread beyond its hedge fund origins—even institutional
investors now have activist agendas.
For example, four directors from activist fund Starboard Value
were added to Yahoo!’s board in April 2016, while United Continental
appointed two new board members in the same month to pacify
agitated activists PAR Capital and Altimeter Capital Management.
Board engagement with shareholder activists is ensuring better
dialogue in some cases, with a more constructive approach
resulting in win-win situations—but win-win is often in the eye
of the beholder.
“In the US, if you’re an activist, you’re not necessarily trying to
get majority control of a board, you’re just looking for a couple of
seats. And in all likelihood, you’re going to win them because of the
growing influence of proxy advisory services, which will typically
recommend a vote in favor of this sort of move,” says Pierce at
White & Case.
“Boards realize they are likely to lose these contested elections,
so they usually settle to avoid the expense of the contest and
the loss of management focus on the business. They are not
surrendering a majority of the board, just one or two seats. But
this change in board composition can have significant influence
on the board’s decisions in the future.”
It’s too early to say where shareholder activism will take
US M&A at the moment, but their influence is certainly being
felt. And as their influence rises, activists are facing their own
challenges. The US Department of Justice, for example, has
recently filed a suit against ValueAct over its possible failure to
comply with the Hart-Scott-Rodino Act.
However, once shareholders are on the board, they can often
rally their cause and push board members in unexpected directions.
US
$83.8
billion
Total US M&A
outbound deal value,
headed by the UK
on US$20.8 billion
(with 128 deals),
just ahead of Ireland
on US$17.3 billion
73
Total inbound
US M&A deals
by Canada, worth
US$50.6 billion

traditional sectors. And, with US
companies having raised more
than US$50 billion in debt since the
beginning of the year—the second-
highest amount in two decades—
they are likely to be gearing up to
strike fresh deals.
“Some of the more forward-
thinking, established companies are
realizing that in order to compete
with the latest technologies—and
have the team of talent to maintain
them—they have a build or buy
decision to make: Are they going to
build them organically or are they
going to buy them?” asks Arlene
Hahn, a White & Case partner who
specializes in tech transactions.
“Many larger companies are
proactively searching for the next
big thing in technology. It’s not
just financial services anymore,
it’s fintech. It’s not just health,
it’s digital health.”
Finally, across all sectors, there
have been fewer distressed asset
deals, though there are pockets
of activity, particularly in oil and
gas, which is struggling with the
impact of depressed oil prices.
“We’ve got our hands full
with restructurings, primarily
for service companies. The
businesses that rely on payment
streams from the big producers
are suffering. We are experiencing
high volumes of chapter 11 filings”
says Gregory Pryor, a partner at
White & Case.
For more on specific sectoral
M&A, see Sector Watch, page 9.
Companies from
Asia are getting more
comfortable with the
US environment and
processes, with how
to come in and buy
a company in the US.
John Reiss, Global Head of M&A,
White & Case
Buying a US public company:
the fundamentals
What particular factors should foreign bidders consider when
buying US public companies?
First and foremost, foreign acquirers should be familiar with
customary US public M&A transaction structures. The operative
M&A document in US public acquisitions is almost always a
merger agreement.
Mergers either consist of one-step merger transactions or
two-step tender offers followed by squeeze-out mergers.
Historically, in terms of the form of the transaction, two-step
transactions—structuring the acquisition as a tender offer followed
by a short form or statutory second-step squeeze-out merger—
are completed much faster than one-step transactions.
One-step transactions require a proxy statement and target
shareholder approval. If the transaction is subject to regulatory
approvals and securing approvals would take longer than the
traditional two-step process, a one-step transaction structure is
typically better for an acquirer, because it provides stronger deal
protections against interlopers than a two-step transaction in
this context.
Acquirers must also decide on the overall structure of the deal,
the most common being a three-party “forward” or “reverse”
triangular merger. In a forward triangular merger, a target company
is acquired by a subsidiary of the purchasing company. In a reverse
triangular merger, the acquiring company creates a subsidiary, which
then purchases the target company and the former is then absorbed
by the target company, effectively creating a new company. In either
case, all of the target company assets and liabilities end up being
owned by a subsidiary of the acquirer.
The direction of the merger (i.e., whether the target company
or the merger subsidiary survives the transaction) is largely driven
by tax and due diligence considerations.
Targets generally prefer structures that maximize speed and
certainty of closing. If the acquirer only wants to purchase a
subsidiary of a public company or one of its particular lines of
business, then deciding between stock and asset purchases
becomes relevant.
Generally, in a stock transaction, the buyer automatically
acquires all of the assets of the target company and automatically
assumes all of the liabilities. Asset purchases allow acquirers to
purchase particular assets or lines of business and to assume
only specified liabilities. But asset purchases can be more
complicated when it comes to structure and diligence.
In terms of deal consideration, acquirers should expect that
shareholders will let the market know if they think that a particular
purchase price is inadequate. It is important for acquirers to have
a good understanding of the target’s shareholder base and be
reasonably comfortable that the transaction will receive
shareholder approval.

O
nce again, TMT tops
the industry-specific
M&A volume table as
investor hunger for opportunities
in tech continues to grow. In the
first half of 2016, the sector saw
495 deals, well ahead of the next
highest, Industrials & Chemicals, in
which 372 transactions were made.
The latter was characterized
by a particular interest in
petrochemicals, particularly with
regards to agriculture, continuing
a trend that began in 2015 with
the US$130 billion merger of Dow
Chemical and rival DuPont, and
Bayer’s ongoing interest in US
agribusiness Monsanto.
A healthy future for M&A?
Headline-grabbing moves in other
sectors include the US$35.2 billion
megadeal that saw Ireland’s Shire
PLC acquire Baxalta in January,
followed by Abbot Laboratories’
acquisition of St. Jude Medical in
late April for nearly US$30 billion.
Those two deals, worth more
than US$65 billion, account for
56 percent of the total PMB deal
value for H1 2016. Alone, they
amounted to more than half of the
US$88 billion accrued by the other
eight M&A deals in the top ten,
underlining the impact of the PMB
sector on deal values in H1 2016,
despite the sector only being fourth
in terms of volume at 250.
Given the recent innovations in
healthcare technology, from mobile
x-rays to long-distance diagnosis,
the TMT and PMB sectors may be
on course for convergence through
M&A in coming years. However,
according to White & Case partner
William Choe, strategic partnerships
or investments coupled with
partnership agreements between
companies are sometimes more
attractive than M&A.
Choe cites the example of a
medical devices producer creating
implants that can collect a patient’s
medical data.
“The data is stored in the cloud
and examined with big data
analytics software to provide
insights for patient diagnosis and
therapeutics,” he says. “Under
these circumstances, a medical
devices business might find it more
practical to enter into commercial
arrangements with cloud services
and data analytics companies, rather
than acquiring them. The evolution
and integration of advanced
technologies could drive or hinder
M&A activity in different scenarios.”  
Power moves
The energy, mining and utilities
(EMU) sector features in the top
HEADLINES
n In terms of volume,TMT leads the way in the first half of 2016, with 495 deals, followed by Industrials & Chemicals at 372 deals
n PMB dominates the value field, although two megadeals account for 56 percent of total PMB deal value for H1 2016 n Dealmakers
still have an appetite for tech, with the number of deals remaining consistent, despite relatively low values
Sector watch: tech,
pharma and energy
Top sectors 2016 H1, by value
0
20,000
40,000
60,000
80,000
100,000
120,000
AgricultureDefenceConstructionTransportLeisureFinancial
Services
ConsumerReal
Estate
Industrials
& Chemicals
Business
Services
Energy,
Mining &
Utilities
TMTPharma,
Medical &
Biotech
495
TMT volume
in the first half of
2016, topping the
industry-specific
M&A table

10 White & Case
deals of the first six months of
2016—though it is below historic
highs. There were 176 deals,
making it the seventh-biggest
sector, possibly due to sustained
low oil prices.
Three large energy deals were
completed in the first quarter of
2016, the largest being Great Plains
Energy’s US$12.1 billion bid for
utility Westar Energy, which
completed at the end of May.
Great Plains, the parent company
of Kansas City Power & Light, will
assume US$3.6 billion of Westar’s
debt and boost its customer base
by 1.5 million in Kansas and Missouri.
The other sizeable power sector
deal saw Canada’s Fortis absorb
ITC Holdings.
Oil and gas deals, meanwhile,
are topped by midstream
transactions that reflect the
paucity of interest in exploration
and production (E&P) opportunities.
“While there’s some stress on
the power side of the M&A market,
this is not nearly as pronounced
in upstream oil and gas,” says
Gregory Pryor, a White & Case
partner. “Few deals have come to
the fore in the upstream oil and
gas space, reflecting the general
uncertainty over prices and asset
values. People can only decide what
to do strategically if they know
where things are going to land.”
The big oil and gas and E&P
players have “hunkered down”,
according to Pryor, cutting back
expenditures and, for the most
part, not pursuing targets. This
situation may change. As oil
prices stabilize, buyer and seller
expectations could begin to align
and produce an uptick.
Activity may also be spurred
on by chapter 11-related asset
sales aiming to generate funds
to distribute to creditors.
Alternatively, hybrid restructuring-
type M&A could step up, with
creditors simply taking over the
keys to these companies through
the restructuring process.
“For the first half of 2016, oil and
gas businesses have been more
focused on distressed M&A and
restructuring-related M&A,” says
Pryor. “That’s the real story.”
Tech still taking hold
While only one of the top 10 deals
in H1 was technology focused, it
is still very much at the fore across
the board. Dealmakers still have
an appetite for tech as it relates to
healthcare, big data analytics and
machine learning, fintech, cloud
services, data security and the
Internet of Things. The difference
now, after the large consolidations
of 2015, is that buyers seem more
interested in mid-size or smaller
deals, according to Choe. 
As he points out, a slowdown
following the tech M&A boom of
2015 is hardly surprising, as buyers
reorganize their post-deal operations.
However, the number of mid-size
deals has been climbing in 2016,
suggesting that the slowdown may
be more a question of deal size
than volume.
An exception to the trend is
Microsoft’s US$26 billion takeover
of LinkedIn, announced in June 2016,
one of the largest deals of the year
so far in any sector.
“While we have seen decreases
in the total value of tech-driven
US M&A in 2016, the number of
deals has remained pretty stable.
The megadeals that characterized
this space in 2015 may not resurface
during the course of this year, but
the overall tech deal flow does not
seem to be slackening,” says Choe.
Broader emerging technology
megatrends are playing a part in
this process, creating new M&A
demand for companies that
Tax inversions
A staple of some large cross-border transactions over the past few
years, tax inversions typically involve a company that is subject to
the US tax system on worldwide income and that is attempting to
re-domicile in a foreign jurisdiction with lower tax rates.
However, there has been an increasing public and political
backlash over such deals. In April 2016, the US Treasury announced
new measures to clamp down on inversions, making it difficult for
companies to move tax addresses out of the US and then shift their
profits to lower-tax domains.
“Under the existing rules, an inversion generally gets triggered
when the shareholders of the US entity own 60 percent or more
of the new foreign parent,” says Andrew Kreisberg, a partner at
White & Case. “The new rules have made it easier to cross this
threshold test by, in effect, increasing the size of the US entity
and decreasing the size of the foreign entity in certain situations.
As a result, shares of the new foreign parent that are issued to US
shareholders are deemed to constitute a larger percentage of the
new foreign parent.”
Does that mean tax inversions are off the agenda? Not necessarily.
Smaller inversions may still be possible.
“Some of the bigger deals might go away, but inversions are not
gone for good” says Kreisberg. "It will be interesting to see what effect
the new earnings stripping rules have on the frequency of inversions.”
produce enabling technologies,
such as the ASIC chips that allow
for machine learning. The tech
M&A market comprises a complex
array of integrated sub-sectors,
and smaller specialized companies
within these sub-sectors may prove
to be very attractive.  
Finally, convergence will continue
to push US M&A in years to come
as non-tech companies become
increasingly active in the tech
M&A market.
“Universal connectivity, the
social web, big data, the cloud
and, most importantly, blockchain—
these have all created the perfect
environment for smaller startups
to be noticed,” says Hahn.
“Larger companies need to decide
if they want to take the time and
money to build new technology
offerings themselves or if they
need to buy them in order to
jumpstart—or just keep up with—
the competition.”

12 White & Case
T
echnology has been
encroaching into financial
services territory for more
than half a century—from ATMs
in the 1960s to the introduction
of electronic market trading in the
early 1980s. However, interest
in companies that propagate
technological innovation in the
industry has boomed in the past
few years, throwing fintech into
the mainstream.
Last year, a number of fintech
deals shook up assumptions about
how financial services work.
HEADLINES
nVenture capital funding in the US fintech sector during Q1 2016 increased 70 percent over the previous quarter, to US$1.7 billion
n 47 percent of all fintech M&A in 2015 related to payments systems nThe evolving regulatory landscape and past fintech performance
will likely have an impact on current and future M&A activity
Fintech: revolution
and regulation
These included deals such as
exchange and marketplace operator
ICE acquiring financial data vendor
IDC from private equity firms Silver
Lake Group and Warburg Pincus
for US$5.2 billion, and DH Corp’s
decision to purchase financial
software maker Fundtech for
US$1.25 billion. Away from billion-
dollar acquisitions, early-stage
investors are also increasingly
looking to provide seed capital to
exciting new fintech opportunities.
In Q1 2016 for instance, overall
venture capital (VC) funding in the US
fintech sector increased 70 percent
compared to the previous quarter,
reaching US$1.7 billion, according
to a report on fintech VC trends
published by KPMG and CB Insights.
Fintech deals are not just limited
to incumbent industries or VCs,
either. Large financial institutions are
also buying out startups rather than
just purchasing minority stakes. For
example, in August 2015, BlackRock,
the world’s largest fund manager,
acquired California-based “robo”
advisory firm FutureAdviser for
US$150 million.

In March 2016, Goldman Sachs’
Investment Management Division
announced it would acquire digital
retirement savings platform Honest
Dollar for an undisclosed sum. And
in April, US financial services firm
Ally Financial acquired digital wealth
management company TradeKing
Group for US$275 million.
“There are tremendous
opportunities establishing
themselves,” saysWhite & Case
partner Kevin Petrasic. “We will
see significant transactional activity
involving various entities, some of
whom may have great funding while
others have insufficient funding, or
they may have a lot of money but not
necessarily a great idea, or vice versa.”
Payments’ progress
Fintech has the potential to
completely transform the financial
services industry across the entire
supply chain, from the consumer-
facing aspect of handling transactions
to the nuts and bolts of accounting
practices. Focusing on the former,
the payments segment of fintech has
seen an astonishing rise. According
to data provider Pivotl, 47 percent of
all fintech M&A last year related to
payments systems—and with good
launch in the past few years looking
to lock horns with larger, more-
established players by competing
on consumer-sensitive issues such
as fees.
In response, many larger
institutions are looking to snap up
these young competitors early on.
Spanish banking giant BBVA, for
instance, purchased American start-
up Simple in 2014 for US$117million,
and added to its portfolio last year
by buying a 29.5 percent stake in
British digital-only lender Atom for
£45 million.
New kids on the blockchain
While not as developed as the
payments subsector, blockchain
could enliven the fintech M&A
market in the coming years. The
technology has garnered interest
because of the way it decentralizes
the control of data—therefore
making it more secure, drastically
cheaper and faster by decreasing
the transaction costs and
eliminating intermediaries.
“There are so many different
products and services that can be
built using blockchain,” says Petrasic.
“Kansas-based CBW Bank, for
instance, has tremendous
blockchain capabilities.”
Investment so far in blockchain
has been small compared to the
payments sector, but increased
VC activity in the space points to
brighter things in the near future.
A KPMG/CB Insights report from
March found that investment
in bitcoin and blockchain rose
from just US$3 million in 2011
to US$474 million in 2015.
While outright acquisitions in the
blockchain space have been limited,
major financial services players
are still keen to keep abreast of its
development.This is particularly
There are tremendous
opportunities [in fintech
M&A] establishing themselves.
We will see significant
transactional activity involving
various entities.
Kevin Petrasic, Partner, White & Case
reason. Financial information firm
Markit forecasts that the total value of
mobile payment transactions will rise
by 210 percent to US$27.05 billion in
2016, up from US$8.71 billion in 2015.
In Petrasic’s view, the payments
sector may help “socialize” the
transactional M&A experience,
simply because it is far more
familiar with this kind of technology.
“Payments has been on the cutting
edge of technology in financial
services for some time, and in
many respects, it continues to lead
the way in fintech,” says Petrasic.
“The segment has been besieged
with interest from players in a wide
variety of sectors, from banks to
tech and telecoms companies. The
companies that develop the best
tech-based solutions could lock in
a huge competitive advantage.”
Established firms are looking far and
wide to lock up this edge as well.
For instance, in July, MasterCard
invested an undisclosed sum in
India-based online payment gateway
solution Razorpay.
As well as affecting subsectors,
fintech is also eschewing wider
industry norms to shake up financial
services. Banking, for example, has
seen a host of startup companies

14 White & Case
noticeable among both US and
foreign banks, which are exploring
the technology’s potential with
tremendous interest. In September
of last year, for example, nine of the
world’s largest banks—including
Goldman Sachs, J.P. Morgan, Barclays
and UBS—joined forces with fintech
firm R3 with the goal of creating
a framework for using blockchain
technology in the markets.
“Banks that are multiple sizes
larger than CBW are cautiously
exploring blockchain,” says
Petrasic. “But they’re all at
different points along the learning
curve, with many still far from
any actual implementation.”
Whose rules?
While the excitement surrounding
the investment and M&A potential
in fintech is understandable, several
factors have caused consternation
among would-be investors.
For example, while these
breakthroughs offer a wealth
of opportunities, companies have
to be mindful of the regulatory
implications, as governmental
agencies play catch-up with each
new development.
In March, for example, the Office
of the Comptroller of the Currency
in the US issued a white paper to
launch formal discussions between
regulators and fintech industry
leaders. And while Republican
Congressmen and women are looking
to promote a legislative package
covering fintech called “Innovation
Initiative”, laws specifically covering
modern financial services technology
are still in their infancy.
“A challenge for regulators is
that they have to make sure that
the day-to-day is taken care of
while looking ahead to address
new developments,” says Petrasic.
“That includes considering ways
that regulations may need to be
adjusted to facilitate innovation
but also to manage emerging
issues related to cyber security
and consumer protections.”
Another regulatory curiosity
fintech investors should consider is
that while fintech exists in somewhat
of a regulatory vacuum, the financial
services industry it is looking to
capture is one of the most heavily
regulated in the world. How this gap
will be bridged has yet to be decided.
“Just in the banking context
at the federal level, there is the
Federal Reserve, the Federal Deposit
Insurance Corporation, the Office of
the Comptroller of the Currency—as
well as various other offices of the
Department of the Treasury—and
the Consumer Financial Protection
Bureau,” notes Petrasic. “There
are also regulators in each of the
states. All of these players have very
important roles in regulating financial
services companies, but their roles
often overlap.”
False startup
Regulatory uncertainty may cloud the
direction of fintech’s future. However,
examples from the burgeoning
industry’s past suggest that, rather
than focusing on what legislation
may do to hamper it, investors need
to pay more attention to the viability
of some areas of fintech.
One key representation of this
is the once-vaunted marketplace
lending sector, which accrued
major interest in the past few years.
However, recent developments and
performance from some of its key
companies have cast a shadow over
its viability.
For instance, Lending Club stock
plummeted in 2016 when its CEO
resigned following an internal probe
that found the company had
knowingly mis-sold faulty loans to an
investor. Elsewhere, marketplace
lender Prosper cut ties with loan-
referral websites LendingTree and
Credit Karma in June, suggesting a
slowdown in appetite for peer-to-peer
loans.This came after the company’s
loan volume fell by 12 percent in the
first quarter of 2016.
Even more glamorous segments
of fintech have seen companies
struggle. Square, for example, one
of the most high-profile fintech
payments companies on the
planet, saw its share price fall to
US$9.27 by July 1 after opening in
November at over US$13.
Over the next few years, fintech
M&A is likely to proceed in a stop-
and-start fashion, but, ultimately, it
is likely to be a source of significant
activity that could reshape both the
retail and corporate segments of the
financial sector.
70%
Increase in Q1 2016
venture capital
(VC) funding in the
US fintech sector
compared to the
previous quarter,
reaching
US$1.7 billion
47%
Almost half of
all fintech M&A in
2015 related to
payments systems
Banks that are
multiple sizes larger
than CBW are
cautiously exploring
blockchain. But
they’re all at very
different points
along the learning
curve and further
away from any actual
implementation.
Kevin Petrasic, Partner,
White & Case

US M&A in figures
*The Intelligence Forecaster is based on “companies for sale” tracked by Mergermarket in the United States between January 1 and July 6, 2016. Mergermarket’s Intelligence Forecaster of
predicted deal flow is based on intelligence relating to companies rumored to be for sale, or officially up for sale. It is therefore indicative of sectors that are likely to be most active during 2016.
Total US M&A 2011 – H1 2016
Volume
0
500
1,000
1,500
2,000
2,500
3,000
H1 2015H2 2014H1 2014H2 2013H1 2013H2 2012H1 2012H2 2011H1 2011H2 2010H1 2010H2 2009H1 2009
Value†
Inbound M&A by country, H1 2016
Canada
73 deals
US$50.6 billion
United
Kingdom
67 deals
US$5.9 billion
China
42 deals
US$27.5 billion
Japan
39 deals
US$6.9 billion
France
30 deals
US$0.9 billion
Germany
23 deals
US$12.3 billion
Switzerland
23 deals
US$0.6 billion
Sweden
18 deals
US$2.8 billion
Outbound M&A by country, H1 2016
United
Kingdom
128 deals
US$20.8 billion
Canada
75 deals
US$7.2 billion
France
35 deals
US$7.3 billion
Germany
34 deals
US$3.1 billion
Italy
24 deals
US$3.9 billion
Australia
23 deals
US$1.4 billion
India
22 deals
US$2.5 billion
Netherlands
21 deals
US$1.7 billion
†
Indicated by size, where the smallest is US$129 billion, and the largest is US$554 billion.
TMT, industrials and business services poised to be most active in 2016
Lowest
deal ﬂow
Highest
deal ﬂow
431 TMT366 Pharma
225 Business services165 Consumer
191 Financial services
43 Construction
66 Leisure
36 Transportation
13 Agriculture
2 Other 276 Industrials and chemicals
223 Energy, mining and utilities33 Real estate9 Defense
The M&A Forecaster* predicts sector deal flow by volume in the US M&A market for 2016.

16 White & Case
P
rivate equity deal activity was
under pressure in the first
half of the year, as the high
yield debt market went into a tailspin
and banks hesitated to support
leveraged buyouts.
“For a good portion of the first
and early second quarter, there
was almost no debt available,”
says Oliver Brahmst, a partner at
White and Case. “As a consequence,
the beginning of this year saw
a pretty big drop in activity.”
The number of private equity
buyouts declined 8.4 percent in
H1 2016 year-on-year, though deal
values increased slightly from
US$62.8 billion to US$74.3 billion.
The decline in private equity exits
was slightly less pronounced, with
just 423 deals in the first half of
2016, compared with 448 during
the same period in 2015. However,
exit values dropped 11 percent to
US$99.7 billion.
In terms of sectors, there is
still appetite for PE deals in areas
such as PMB and TMT. The biggest
first-quarter exit involved computer
services group Dell’s acquisition by
NTT DATA Corp. for US$3.1 billion.
In another large H1 2016 deal with
a PE component, medical supplies
maker Sage Products was sold
in February by PE firm Madison
Dearborn Partners to medical
technology company Stryker Corp.
for US$2.78 billion.
On the medical tech
convergence side, US healthcare
IT firm Truven Health Analytics
was acquired by IBM in February
for US$2.6 billion from New York–
based private equity firm Veritas
Capital, which bought Truven in
2012 for US$1.3 billion.
Demographics in the US support
investment in healthcare. As a
percentage of GDP, US citizens
continue to spend more money on
healthcare and drug development
than most other countries, and
PE firms are paying attention.
“These are very attractive deals
to any investor, but private equity
especially has got into the software
and tech sectors in a big way in the
past couple of years,” says Brahmst.
“The reasons are fairly obvious—this
approach gives them a good fallback,
it’s scalable and there’s not much
capital expenditure.”
Tech talk
The tech sector’s appeal in general
is obvious, with the US remaining
HEADLINES
n The volume of private equity buyouts dropped 8.4 percent in H1 2016 year-on-year n Deal values increased from US$62.8 billion
to US$74.3 billion n Private equity exits were down 5.6 percent in H1 2016 year-on-year n Exit values dropped 11 percent to
US$99.7 billion
Private equity:
searching for strategies
Private equity exits 2011 – H1 2016
Numberofdeals
Volume Value
2011 2012 2013 2014 2015 2016
0
50
100
150
200
250
300
0
10
20
30
40
50
60
70
80
90
8.4%
The decline in
private equity
buyouts in
H1 2016
year-on-year—
deal values
increased slightly
from US$62.8 billion
to US$74.2 billion

a global leader in the field. PE clients
have determined a way for PE to play
a role after a tech company leaves
the venture capital space and before
it chooses to go public. Rather than
buying it in a private sale, private
equity can take it to the next level.
For example, the biggest
PE-linked deal in the first half of
2016—one of the largest leveraged
buyouts in recent years—saw PE
firm Apollo buy out home security
systems manufacturer ADT and
merge it with security specialist
Protection 1, in a deal valued at
US$15 billion, including debt.
“You’ll see more PE firms and
hedge funds broadening their
offering, and there’s certainly plenty
of money out there that is getting
invested in all levels of the capital
structure, whether in healthy or
distressed assets,” says Brahmst.
He points out that many large PE
firms have morphed into alternative-
asset managers, owning distressed
funds and diversifying across the
capital structure.
“You need the strategy and you
need the management team,” he
says. “Take software: It’s much
cheaper than running an airline,
there’s no capital expenditure and
it’s extremely scalable.”
A new way for PE deals?
Despite the slowdown in activity
and the temporarily weaker debt
markets, money continues to
migrate into PE deals. Successful
managers are figuring out how
to make money not just by being
leveraged. Debt is less pivotal to
deal success these days.
“We have clients who just co-
invest in minority stakes, and we
have clients who invest more equity
than debt because they understand
how they can grow the company
by increasing profits and maybe
Buyouts by sector
0 20 40 60 80 100 120
Business Services
Construction
Consumer
Energy, Mining & Utilities
Financial Services
Industrials & Chemicals
Leisure
Pharma, Medical & Biotech
TMT
Transport
Deal value (US$ billion) Number of deals
even increasing the multiples,”
says Brahmst. “They see valuation
and multiples increases on the
horizon both on an industry and
company level.”
A higher level of PE-backed M&A
can be expected, reflecting a desire
to find new ways to make deals work.
Simply taking control of investments
and leveraging the company with
debt is proving less effective.
The large club deals that used
to dominate in PE are unlikely to
come back anytime soon, with less
appetite to team up than before.
However, a different form of club
deal—described as “quasi club”—
could be emerging.
“We are now involved in large
transactions where the seller is
going to roll over some of its equity
into the new deal, so it becomes a
club deal,” says Brahmst. “There is
a significant amount of equity, but
the buyer recognizes it can’t write
the entire equity check by itself, so
it is prepared to roll over some of its
investment. The seller, on the other
hand, wants to take some money
off the table, but it still wants to ride
the upside.
“Some non-US funds that have only
previously dipped their toes in the
US market have done deals where
the seller has rolled over, and that
has given them some confidence.
They become a team, with the roll-
over seller bringing their historical
expertise and knowledge of the
company and the US domestic
market into the boardroom.
“That gives, for example, a
London-based PE buyer much
more confidence that they can
understand and be successful in
the US market,” says Brahmst.
While there remains challenges
on the horizon, Brahmst argues,
the outlook remains good: “From a
personal perspective, I’m as busy as
ever. Maybe that’s anecdotal, maybe
I’m just lucky, but I’m seeing a lot of
activity in a lot of different sectors.”
US
$6.5billion
The value of the
biggest first-quarter
exit—China-based
Anbang Insurance
Group’s purchase
of Strategic Hotels
& Resorts from
Blackstone Group
$

18 White & Case
Conclusion:
politics, tech and
plenty of capital

Following a record-breaking year, the
US M&A market is taking time to digest
recent deals, and uncertainty regarding
broader macroeconomic and political
issues is leading some to take a more
cautious approach.Three broad factors
are likely to influence activity for the
remainder of 2016:
Politics at play
The political climate may lead many
to proceed with caution.The UK’s
Brexit decision ensures that economic
uncertainty will continue in Europe,
and the US presidential election in
November may also cool the ardor for
transactions. Stricter rules limiting tax
inversions—a structure used for several
pharma megadeals in recent years—
may also give pause for thought.
Tech deal traffic
There are signs of more mid-size deals
in the tech sector, with suggestions that
the decrease in overall deal values is not
reflective of the continued strength of
this space.The number of actual deals
has remained stable, and the economics
for tech M&A remain viable. Moreover,
the rapid pace of technological
change can make it more practical for
established tech companies to buy
innovative start-ups rather than investing
in their own R&D channels—a process
that would be facilitated by many buyers’
cash-rich balance sheets.
Money on the table
There is certainly available capital should
companies wish to pursue an M&A
route. Firms are still buying stock, which
indicates that they have the resources
for transactions. But many of the more
exciting opportunities, such as fintech,
are in the early stages, which makes it
difficult to anticipate any major moves.
The rest of 2016
As we go to print in late July, we see
a noticeable slowdown in activity.We
think the US M&A market is taking
a short breather and will come back
strongly in September, absent some
big exogenous shock. Most of the
conditions for a busy end of year
remain in place: Lots of cash, low
interest rates, strong stock markets
(notwithstanding the elections
and Brexit) and plenty of strategic
imperatives in many industries that can
best be satisfied through acqusitions.
San Francisco,
California
US elections: an exercise in uncertainty
The febrile political atmosphere in US politics—particularly surrounding
DonaldTrump’s rise as the Republican nominee—has shifted political
risk higher up the corporate agenda when it comes to gauging
potential M&A decisions.
Even in the early months of the presidential primaries, the political
climate was already having an impact. New measures on tax inversions,
introduced by the US Treasury Department in early April 2016,
highlighted serious differences between the parties, notes William
Dantzler, a partner at White & Case who specializes in tax issues.
“Whereas the Democrats want to surgically cut out inversions and
deal with the fact that our tax system is ‘out of whack’ with the rest
of the world later, the Republicans want to use inversions as a hold-up
opportunity to deal with the ‘out of whack’ tax system and so don’t want
to do anything about inversions either tactically or surgically,” he says.
While inversions are still being talked about in the presidential
campaigns, Dantzler does not believe it will be an ongoing concern.
“There won’t be many future discussions about inversions, but
you will hear people talking about American companies leaving
America and taking jobs with them,” he says. “Both Hillary Clinton
and Donald Trump have assailed that in their different styles.”
Another key consideration is the way the presidential candidates
will deal with foreign ownership. In the past, Middle East and Chinese
buyers have encountered opposition on national security grounds.
Much of the focus will be on CFIUS.This inter-agency committee
has a mandate to review inbound foreign direct investment where
there is a merger, acquisition or takeover of a US business under
which control effectively shifts to foreign ownership. However, the
US electoral cycle does not necessarily impact CFIUS decisions.
“There is a view that a change of administration in January
2017 could shift the overall perception of foreign direct investment.
The current campaign rhetoric suggests that there’s going to be
more scrutiny. For many investors, the impetus is to get deals done
now,” says Farhad Jalinous, a White & Case partner with extensive
experience with CFIUS issues.
“But in my experience, campaign rhetoric doesn’t necessarily hold
up,” he adds. “Once any new administration has settled into office,
there aren’t usually any material swings in the pendulum regarding
threat vulnerability analysis.”
Bank lending is also on investors’ radar as the US presidential
election approaches. New financing activity may settle down in the
October to November timeframe as the market takes stock of the
candidates, notes Eric Leicht, a White & Case partner who specializes
in bank lending. At this point in the campaign, neither candidate has
proposed anything that would seriously affect lenders’ appetite and
willingness to support M&A deal flow.
“Trump is viewed as pro-business, but Wall Street also craves
stability and Trump is perceived as a wildcard by many,” says Leicht.
“The general view is that a Clinton victory will be favorable for
business, providing continued stability and an approach that should
be the same or even more business–friendly than Obama’s.”

20 White & Case
Global
John M. Reiss
Partner, New York
T +1 212 819 8247
E jreiss@whitecase.com
Americas
Gregory Pryor
Partner, New York
T +1 212 819 8389
E gpryor@whitecase.com
EMEA
Dr. Jörg Kraffel
Partner, Berlin
T +49 30 880911 400
E jkraffel@whitecase.com
Jan Matejcek
Partner, London
T +44 20 7532 1333
E jmatejcek@whitecase.com
Asia
Christopher Kelly
Partner, Hong Kong
T +852 2822 8740
E christopher.kelly@whitecase.com

XXII White & Case
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This publication is prepared for the
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the general nature of its content, it
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Disclaimer
This publication contains general information and is not intended to be comprehensive nor to provide financial, investment, legal, tax or other
professional advice or services. This publication is not a substitute for such professional advice or services, and it should not be acted on or relied
upon or used as a basis for any investment or other decision or action that may affect you or your business. Before taking any such decision, you
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