major mergers and acquisitions

Report by Bain&Company: major mergers and acquisitions

2018 brought an almost record $3.4 trillion to the M&A industry and changed the very nature of mergers and acquisitions. This process was driven by growth in the first half of the year, despite a slowdown in the fourth quarter.
Remarkably, some of the deals that made the headlines last year were not large deals designed to make companies bigger or create synergies. Rather, they focused on acquiring new opportunities or opening up new product or service segments. According to Bain&Company, for the first time in 2018, deal volume exceeded the number of deals and accounted for 51 percent of all strategic deals worth more than a billion, which may be the largest M&A event in the last decade.
According to the head of international mergers and acquisitions practice of Bain & Company, it is impossible not to notice the absolute impulse of the volume of transactions over the past three years. Last year, most deals were not based on “scale”. Rather, they were concluded to expand the scope of action. This is either a sign of excessive confidence, or a huge change in management thinking about the source and value of future growth.
In large-scale deals, the most significant growth occurred in deals aimed at acquiring new services. M&A activity increased, accounting for approximately 15 percent of all strategic deals valued in excess of a billion in 2018, up from two percent in 2015.
According to the report, nearly a third of M&A transactions were direct acquisitions of digital services such as standalone cars, e-commerce, Internet of Things (IoT), digital manufacturing, security, advertising and healthcare.

Trends in major mergers and acquisitions

In addition to accelerating large-scale transactions, the Bain&Company report identifies several other key M&A trends in 2018.
Firstly, private investment companies are increasingly behaving like strategic buyers. In search of good investment, sponsors use a wider range of approaches to invest in large deals and take advantage of consolidation through additional deals. Together, these approaches make some sponsors look more like strategic buyers. While the vast majority of mergers and acquisitions – around 83% in value and 90% in volume – are still carried out by strategic buyers. Bain&Company’s audit shows that investors, mainly private equity firms, are increasingly involved in large deals that compete with traditional corporate buyers.

Secondly, the government has begun to interfere in business affairs based on national interests. States around the world are increasingly confronting major inter-regional business associations on the basis of national interests and security.
In addition, inter-regional transactions are losing force. Despite the increase in the cost of cooperation last year, transaction volumes have continued to decline. They declined by about 20 per cent due to geopolitical uncertainty, the threat of higher trade tariffs and reduced structural arbitration. Overall, 2016 was the culmination of interregional mergers and acquisitions. Deal flow declined significantly in 2017 and partially recovered in 2018.