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  • Whitepaper | February 2020

    M&A Roundup: What’s in store for 2020

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    Table of Contents

    1. 3Global M&A Activity in 2019: Overview

    3.

    2.

    5

    4

    Key M&A Highlights by Region

    Global M&A Breakdown

    4. 7Outlook

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    Global M&A Activity in 2019: Overview

    Global M&A deal activity reduced by 6.9% to USD 3.33tn (across 19,322 deals) compared to the record M&A activity in 2018. Deal-making slowed down in 2H 2019 compared to a strong 1H 2019, as macro-economic, geopolitical, and regulatory uncertainties weighed down potential acquirers. Despite reduced deal activity in 2H 2019, the US was home to 47.2% (in terms of deal volume) and 50.8% (in terms of Deal Value) of Global M&A deal activity in 2019. While European activity reduced by 21.9% in value compared to 2018 and APAC was down 22.5%, the US market was resillient and grew by 1.5% compared to 2018, supported by a relatively strong economy and a number of large domestic deals. Increased geopolitical tensions between the US and China and after more than six months of anti- Beijing protests in Hong Kong, the China and Hong Kong area’s global M&A market share shrunk from 11.4% in 2018 to 8.8% in 2019, while deal value plunged 27.7% y-o-y to USD 294.5bn

    Market Shares in Global M&A, by Deal Value (%)

    Global Quarterly M&A, by Deal Value (USDbn)

    53%

    2.3% 15.3%

    1.3%

    23%

    5%

    Year Q1 Q2 Q3 Q4 Total Growth%

    2015 762 1,041 870 1,201 3,874 -21%

    2016 626 743 866 959 3,194 -18%

    2017 763 758 717 954 3,193 0%

    2018 955 1,080 790 754 3,579 12%

    2019 917 980 666 771 3,333 -7%

    Source: MergerMarket

    Source: MergerMarket

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    481 320

    651

    446 310

    1,372

    524 477 449 384 340

    1,160

    Industrials & Chemicals

    Pharma, Medical & Biotech (PMB)

    Energy, Mining & Utilities (EMU)

    Technology Financial Services Others

    2018 2019

    481 320

    651

    446 310

    1,372

    524 477 449 384 340

    1,160

    Industrials & Chemicals

    Pharma, Medical & Biotech (PMB)

    Energy, Mining & Utilities (EMU)

    Technology Financial Services Others

    2018 2019

    +9% -31%

    10% +49% -14%

    -15%

    Global M&A Breakdown

    Globally Industrials & Chemicals saw the highest deal activity with USD 523.8bn in deal value, up 9% compared to 2018

    Saudi Aramco’s acquisition of a 70% stake in SABIC for

    ~USD 70bn was the largest deal in the Industrials & Chemicals segment

    (USDbn) North America Latin

    America Europe Middle East

    & Africa APAC

    (ex. Japan) Japan

    Rank #1 #5 #2 #4 #3 #6

    Total M&A Deal Value 1,695 86 771 141 565 75

    Inbound Deal Value 296 57 317 49 106 12

    Outbound Deal Value 335 9 272 22 99 99

    Major Industry by M&A activity

    Pharma, Medical &

    Biotech

    Energy, Mining & Utilities

    Pharma, Medical &

    Biotech

    Industrials & Chemicals

    Industrials & Chemicals Technology

    M&A Deal Value in Major Industry

    264 31 164 73 112 22

    Global Geographical Breakdown, by Deal Value (USDbn)

    Global Sector Breakdown, by Deal Value (USDbn)

    Source: MergerMarket Note: Others include Agriculture, Automotive, Construction, Consumer, Defense, Government, Leisure, Media, Real Estate, Telecommunication and Others

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    Key M&A Highlights by Region United States

    Europe

    Japan

    Latin America

    APAC(ex. Japan)

    Middle East & Africa

    USD 767.9m

    USD 454.1bn

    USD 75.4bn

    USD 30.6bn

    USD 14.3bn

    USD 49.2bn

    29

    1,094

    25

    77

    11

    50.3%

    99.5%

    21.2%

    USD 21.5bn

    187%

    27.6%

    87.1%

    Average deal size for disclosed deals in FY19

    Value of intra-European M&A in 2019, down 14.7% versus 2018

    Value of Japan-targeted M&A, 59.5% increase on 2018

    Average deal size for disclosed deals in FY19

    Acquisition of Hengfeng Bank by China SAFE Investments was the largest deal in 2019

    Value of foreign investment into MEA in 2019, the highest annual figure on record

    Number of Mega deals (DV > USD 10bn) announced in 2019 (USD 794.9bn)

    Number of tech deals in Europe in 2019, the highest annual deal count on record

    Number of Japanese outbound deals above USD 1bn in 2019

    Number of technology acquisitions announced in Latin America in 2019

    Deals above USD 5bn in 2019

    Value increase in energy, mining & utilities M&A versus 2018

    Increase in Pharma, Medical & Biotech M&A from USD 117.4bn in 2018 to USD 234.2bn in 2019

    Pharma, Medical & Biotech share of M&A, its highest figure on record

    Value of M&A in the Technology sector in 2019, highest on record

    Increase in combined deal value in the Construction sector compared to 2018

    Y-o-Y value decrease in US outbound investment to China and Hong Kong

    Value increase in Technology M&A versus 2018

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    Outlook 2020

    • The pace of technological disruption, including the emergence of AI and IoT, has transformed companies across industries

    • Acquisition premiums for technology companies, on average, held steady (24.1% in 2018 versus 24.6% in 2017). However, in 1H 2019, they rose to 31.2%, which is slightly above the long-term average of 30.6%

    • Despite the slowdown in M&A activity in 2H 2019, this sector witnessed some of the big names of tech engage in acquisitions. These include Facebook, Fiserv, GitHub, Google, Microsoft, PayPal, Salesforce and VMWare

    • The growth appetite of these big tech companies is expected to drive M&A activity in 2020

    • M&A activity in 2019 remained unfazed despite challenges such as Brexit, European populism, NAFTA renegotiations and the trade war between the U.S. and China

    • Optimism spillover from 2019 and companies seeking to finish their deals before the U.S. presidential election, are likely to encourage stronger M&A activity in the first half of 2020

    • Additionally, suspicions of an impending economic downturn in the next few years are compelling companies to take advantage of today’s conditions to reassess their portfolio vulnerabilities and invest / divest assets according to their future growth strategy

    Technology to be a Key Focus Area

    M&A Activity to be Stronger in 1H 2020 (Compared to 2H 2020)

    • Scope deals that allow for sector expansion has increased by ~40% between 2015 and 2019 • These deals are gaining popularity as they help firms tackle the business model disruption

    brought about by technological progress • With companies identifying areas that are strategically adjacent to their core competencies

    and acquiring companies from those segments; scope deals are expected to lead M&A in 2020

    • Private equity and venture capital funds are always on the lookout for the next big thing while companies are in pursuit to acquire advanced capabilities to stay competitive

    • With 54% executives in PE and 51% in VC planning to target disruptive technology, competition over deals in AI, extended reality, IoT, robotics and 5G will continue to be intense between strategic and financial investors

    60% of M&A deals over USD 1bn in 2019 were scope deals, an increase from 50% in 2018

    Scope Deals to Overtake Scale Deals

    Strategic M&A Activity to Face Competition from PE/VC

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    It’s Raining Billionaires In China!

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    About the Author

    Clients leverage SGA services across the M&A deal life cycle

    About SG Analytics SG Analytics is a leading global Research & Analytics services company with 700 analysts. SG Analytics is a leading player in supporting boutique and mid-market IB firms globally across a full range of strategic transactions, including mergers, private placements, sell-side and buy-side advisory. We provide you a complete package with access to our sector experts, multiple data sources, design and editorial team.

    Our teams comprise of highly qualified and experienced professionals (with MBA and CFA backgrounds), who not only have the functional but also the psychological skills to deliver in high pressure situations, work flexible hours and possess strong contextual understanding across the various projects we deliver.

    New York | Seattle | London | Zürich | Pune | Hyderabad

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    Ashutosh Khedkar Sr. Analyst

    Investment Banking

    Ashutosh has