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Copyright © McKinsey & Company
Overview of M&A, 2016
MARCH 2017
Michael Park
Andy West
Peter Keneven
Jan 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
4Copyright © McKinsey & Company
Key insights on global M&A activity in 2016
Global M&A activity declined vs 2015
Also adjusting for
increase in market
capitalization, M&A
activity declined,
ending below long term
average8
Corporate M&A
Activity still
represented majority
of the total activity at
~90% of overall M&A
activity
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&A
activity 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&A
activity fell from 34%
to 25%
In 2016, the share of TMT
and Industrial sectors
together represented more
than a third of total M&A
activity 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)
5Copyright © McKinsey & Company
Global M&A market, 2008-16
Announced deals1
1 Includes deals more than $25mn in deal value only
SOURCE: Dealogic
$3,044
-32%
3,500
2,000
500
1,000
0
6,000
10,000
12,000
8,000
3,000
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&A
activity 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
6Copyright © McKinsey & Company
Adjusting for increase in market capitalization, M&A activity declined in 2016 below long term average
Annualized global M&A volume1 as % of global market cap2
1 Announced deals (not withdrawn), includes deals more than $25mn only, total deal value excluding debt
2 Market cap of world-DS market index defined by datastream
3 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
7Copyright © McKinsey & Company
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
2,354
4,000
6,000
0
3,000
4,000
2,000
2,000
8,000
1,000
0
2011 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
800
600
0
2,000
1,500
1,000
200
0
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
8Copyright © McKinsey & Company
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 size
Value1, $ 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>$10bn
465 481 570 647 598$1bn-$10bn
6,851 6,462 7,012 7,742 7,420<$1bn
9Copyright © McKinsey & Company
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 target
2 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 113918921093674703
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 EMEA
deals 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
10Copyright © McKinsey & Company
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, 2012-16
Value1, $ bn, % of total
▪ In 2016, the share of
TMT slightly declined
but still represents
~20% of total M&A
activity 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
11Copyright © McKinsey & Company
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
24
27
39
37
28
32
One week
One month
31
28
26
32
29
27
38
32
28
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
12Copyright © McKinsey & Company 12McKinsey & 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
13Copyright © McKinsey & Company
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%
14Copyright © McKinsey & Company
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%
970805
Domestic
Cross-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 only
2 Intercontinental deals between EMEA, Americas, and APAC
SOURCE: Dealogic
Cross-border deals
Value1, $ 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
15Copyright © McKinsey & Company
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
EMEA
157
Americas
120
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
16Copyright © McKinsey & Company
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%
799
16%
2,138
18%
374
-2%
827
3%
2,264
6%
365
-2%
761
-8%
2,003
-12%
380
4%
805
6%
1,813
-9%
444
17%
970
20%
2,047
13%
474
7%
1,063
10%
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
Deal value (bn)
% change
Number of deals
% change
Average deal
value (mn)
% change
▪ M&A activity in EMEA
region 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 Americas
981
-8%
2,043
-4%
480
-4%
1,309
3,105
422
17Copyright © McKinsey & Company
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
146
123
46 71
70 48
76
73
65
53 54
80
48
64
46
58
54
88
75
35
805
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
761
33
40
230
(23%)
BeNeLux
Russia/EE
France
Middle East & Africa
Iberia
Italy
Scandinavia
2016
Rest of Europe
UK/Ireland
Ger/Swi/AT
981
197
(20%)
40
2015
1,063
EMEA deals by geography
Announced 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
18Copyright © McKinsey & Company
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, 2012-16
Value1, $ 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
19Copyright © McKinsey & Company
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
15
21
21
1312
23
11
33
15
17
2010
19
+77%
African deal volume
Aggregate 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 bn
of M&A activity in 2016
20Copyright © McKinsey & Company
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%
Deal value (bn)
% change
Number of deals
% change
Average deal
value (mn)
% change
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
21Copyright © McKinsey & Company
Americas deals by geography
Announced deals1
$ bn
Americas M&A deals by country/region, 2010-16
SOURCE: Dealogic
1 Includes deals more than $25mn only
2,316
1,735
121
2016
1,891
1,713
86
89
14
1,488
127
2010
778
94
12
89
-20%
2,147
1511
1,216
1,297
87
975
145
149
940
96
13
1,237
1,118
246
118
149
83
1,092
Rest of NorthAm USLatam (incl. Caribbean)
▪ United States saw a
decline (-20%) in M&A
activity 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)
22Copyright © McKinsey & Company
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
Real Estate/Construction
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
23Copyright © McKinsey & Company
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%
Deal value (bn)
% change
Number of deals
% change
Average deal
value (mn)
% change
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
24Copyright © McKinsey & Company
APAC M&A deals by country/region, 2012-16
SOURCE: Dealogic
1 Includes deals more than $25mn only, APAC targets
Australia/NZ
Japan
China
(incl. HK & Taiwan)
Rest of APAC
India
South 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
69
53
75
2013
572
247
(43%)
507
79
85
75
(15%)
85
2012
83
29
48
185
(36%)
43
37
APAC deals by geography
Announced 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
25Copyright © McKinsey & Company
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% =
Real Estate/Construction
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, $ bn
Sector 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
26Copyright © McKinsey & Company
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’s
announcement to acquire
Syngenta for ~$43bn was
the largest Chinese
outbound deal of 2016
27Copyright © McKinsey & Company 27McKinsey & 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
28Copyright © McKinsey & Company
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
29Copyright © McKinsey & 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%
Americas
APAC
EMEA
15%
34%
14%
48%
2009
110
2008
228
50%
43%
40%
17%
268
31%
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&A
remained stable at 11-
13%, greater than the
lows of single digit 5-8%
in the recession period
30Copyright © McKinsey & Company
Hostile M&A deals during period 2008-16
Announced 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%
245
48%
99
18%
2479
25%
186
-24%
104
5%
1788
-28%
116
-37%
89
-14%
1309
-27%
157
35%
61
-31%
2573
97%
662
321%
75
23%
8820
243%
614
-7%
67
-11%
9165
4%
Deal value (bn)
% change
Number of deals
% change
Average deal
value (mn)
% change
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
31Copyright © McKinsey & Company 31McKinsey & 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
32Copyright © McKinsey & Company
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%
33Copyright © McKinsey & Company
We analyzed the value creation at M&A deal announcement for around 2,235 transactions
in 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&A
boom 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&A
boom vs. previous boom)
▪ Are acquirers demonstrating
more discipline in overpaying?
Overall goal Resulting sample
▪ 2,235 transactions
▪ Deals announced from
January 1, 1997 to
December 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%
34Copyright © McKinsey & Company
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
2016
0
2015201020082006 200920052004 2013
DVA1
%
Number of dealsxx
Average,%
182 154
35Copyright © McKinsey & Company
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
SOURCE: Dealogic; Datastream; McKinsey
2002 2005 2014 201620082003 2010
30
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
36Copyright © McKinsey & Company
Average Deal value added1 – Target and acquirer, Percent
Acquirer DVA turned negative - still above long term average;
Target DVA close to long-term average
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
Total DVATarget DVAAcquiror DVA
16
12
8
4
0
-8
-4
-12
-16
-20
141312 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,%
37Copyright © McKinsey & Company
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.
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
DVA pure stock dealsDVA Total DVA Pure cash deals
-10
20
0
5
10
15
-5
25
30
-15
10 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

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Overview of M&A, 2016

  • 1. WORKING DRAFT Last Modified 3/31/2017 10:46 AM Eastern Standard Time Printed 3/31/2017 10:45 AM Eastern Standard Time Copyright © McKinsey & Company Overview of M&A, 2016 MARCH 2017 Michael Park Andy West Peter Keneven Jan Krause
  • 2. 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.
  • 3. 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
  • 4. 4Copyright © McKinsey & Company Key insights on global M&A activity in 2016 Global M&A activity declined vs 2015 Also adjusting for increase in market capitalization, M&A activity declined, ending below long term average8 Corporate M&A Activity still represented majority of the total activity at ~90% of overall M&A activity 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&A activity 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&A activity fell from 34% to 25% In 2016, the share of TMT and Industrial sectors together represented more than a third of total M&A activity 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)
  • 5. 5Copyright © McKinsey & Company Global M&A market, 2008-16 Announced deals1 1 Includes deals more than $25mn in deal value only SOURCE: Dealogic $3,044 -32% 3,500 2,000 500 1,000 0 6,000 10,000 12,000 8,000 3,000 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&A activity 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
  • 6. 6Copyright © McKinsey & Company Adjusting for increase in market capitalization, M&A activity declined in 2016 below long term average Annualized global M&A volume1 as % of global market cap2 1 Announced deals (not withdrawn), includes deals more than $25mn only, total deal value excluding debt 2 Market cap of world-DS market index defined by datastream 3 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
  • 7. 7Copyright © McKinsey & Company 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 2,354 4,000 6,000 0 3,000 4,000 2,000 2,000 8,000 1,000 0 2011 2012 $2,237 2013 2014 2015 3,093 2016 3,370 $1,957 2009 $2,334$2,245 2010 $2,816 2008 420320268303249110228 1,000 400 800 600 0 2,000 1,500 1,000 200 0 500 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
  • 8. 8Copyright © McKinsey & Company 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 size Value1, $ 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>$10bn 465 481 570 647 598$1bn-$10bn 6,851 6,462 7,012 7,742 7,420<$1bn
  • 9. 9Copyright © McKinsey & Company 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 target 2 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 113918921093674703 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 EMEA deals 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
  • 10. 10Copyright © McKinsey & Company 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, 2012-16 Value1, $ bn, % of total ▪ In 2016, the share of TMT slightly declined but still represents ~20% of total M&A activity 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
  • 11. 11Copyright © McKinsey & Company 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 24 27 39 37 28 32 One week One month 31 28 26 32 29 27 38 32 28 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
  • 12. 12Copyright © McKinsey & Company 12McKinsey & 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
  • 13. 13Copyright © McKinsey & Company 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%
  • 14. 14Copyright © McKinsey & Company 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% 970805 Domestic Cross-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 only 2 Intercontinental deals between EMEA, Americas, and APAC SOURCE: Dealogic Cross-border deals Value1, $ 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
  • 15. 15Copyright © McKinsey & Company 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 EMEA 157 Americas 120 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
  • 16. 16Copyright © McKinsey & Company 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% 799 16% 2,138 18% 374 -2% 827 3% 2,264 6% 365 -2% 761 -8% 2,003 -12% 380 4% 805 6% 1,813 -9% 444 17% 970 20% 2,047 13% 474 7% 1,063 10% 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 Deal value (bn) % change Number of deals % change Average deal value (mn) % change ▪ M&A activity in EMEA region 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 Americas 981 -8% 2,043 -4% 480 -4% 1,309 3,105 422
  • 17. 17Copyright © McKinsey & Company 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 80 146 123 46 71 70 48 76 73 65 53 54 80 48 64 46 58 54 88 75 35 805 121 (15%) 2013 32 244 (25%) 445 (42%) 31 104 (10%) 2014 970 165 (17%) 39 168 (21%) 2012 38 143 (19%) 150 (20%) 40 39 761 33 40 230 (23%) BeNeLux Russia/EE France Middle East & Africa Iberia Italy Scandinavia 2016 Rest of Europe UK/Ireland Ger/Swi/AT 981 197 (20%) 40 2015 1,063 EMEA deals by geography Announced 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
  • 18. 18Copyright © McKinsey & Company 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, 2012-16 Value1, $ 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
  • 19. 19Copyright © McKinsey & Company 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 15 21 21 1312 23 11 33 15 17 2010 19 +77% African deal volume Aggregate 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 bn of M&A activity in 2016
  • 20. 20Copyright © McKinsey & Company 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% Deal value (bn) % change Number of deals % change Average deal value (mn) % change 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
  • 21. 21Copyright © McKinsey & Company Americas deals by geography Announced deals1 $ bn Americas M&A deals by country/region, 2010-16 SOURCE: Dealogic 1 Includes deals more than $25mn only 2,316 1,735 121 2016 1,891 1,713 86 89 14 1,488 127 2010 778 94 12 89 -20% 2,147 1511 1,216 1,297 87 975 145 149 940 96 13 1,237 1,118 246 118 149 83 1,092 Rest of NorthAm USLatam (incl. Caribbean) ▪ United States saw a decline (-20%) in M&A activity 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)
  • 22. 22Copyright © McKinsey & Company 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 Real Estate/Construction 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
  • 23. 23Copyright © McKinsey & Company 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% Deal value (bn) % change Number of deals % change Average deal value (mn) % change 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
  • 24. 24Copyright © McKinsey & Company APAC M&A deals by country/region, 2012-16 SOURCE: Dealogic 1 Includes deals more than $25mn only, APAC targets Australia/NZ Japan China (incl. HK & Taiwan) Rest of APAC India South 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 69 53 75 2013 572 247 (43%) 507 79 85 75 (15%) 85 2012 83 29 48 185 (36%) 43 37 APAC deals by geography Announced 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
  • 25. 25Copyright © McKinsey & Company 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% = Real Estate/Construction 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, $ bn Sector 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
  • 26. 26Copyright © McKinsey & Company 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’s announcement to acquire Syngenta for ~$43bn was the largest Chinese outbound deal of 2016
  • 27. 27Copyright © McKinsey & Company 27McKinsey & 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
  • 28. 28Copyright © McKinsey & Company 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
  • 29. 29Copyright © McKinsey & 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% Americas APAC EMEA 15% 34% 14% 48% 2009 110 2008 228 50% 43% 40% 17% 268 31% 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&A remained stable at 11- 13%, greater than the lows of single digit 5-8% in the recession period
  • 30. 30Copyright © McKinsey & Company Hostile M&A deals during period 2008-16 Announced 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% 245 48% 99 18% 2479 25% 186 -24% 104 5% 1788 -28% 116 -37% 89 -14% 1309 -27% 157 35% 61 -31% 2573 97% 662 321% 75 23% 8820 243% 614 -7% 67 -11% 9165 4% Deal value (bn) % change Number of deals % change Average deal value (mn) % change 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
  • 31. 31Copyright © McKinsey & Company 31McKinsey & 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
  • 32. 32Copyright © McKinsey & Company 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%
  • 33. 33Copyright © McKinsey & Company We analyzed the value creation at M&A deal announcement for around 2,235 transactions in 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&A boom 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&A boom vs. previous boom) ▪ Are acquirers demonstrating more discipline in overpaying? Overall goal Resulting sample ▪ 2,235 transactions ▪ Deals announced from January 1, 1997 to December 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%
  • 34. 34Copyright © McKinsey & Company 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 2016 0 2015201020082006 200920052004 2013 DVA1 % Number of dealsxx Average,% 182 154
  • 35. 35Copyright © McKinsey & Company 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 SOURCE: Dealogic; Datastream; McKinsey 2002 2005 2014 201620082003 2010 30 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
  • 36. 36Copyright © McKinsey & Company Average Deal value added1 – Target and acquirer, Percent Acquirer DVA turned negative - still above long term average; Target DVA close to long-term average 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 Total DVATarget DVAAcquiror DVA 16 12 8 4 0 -8 -4 -12 -16 -20 141312 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,%
  • 37. 37Copyright © McKinsey & Company 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. 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 DVA pure stock dealsDVA Total DVA Pure cash deals -10 20 0 5 10 15 -5 25 30 -15 10 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