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D E C E M B E R 2 015

Corporate Finance Practice

M&A 2015:
New highs, and a new tone
Deal activity surged again this yearespecially big deals and those in the United States.

Werner Rehm and Andy West

M&A activity reached a new high in 2015, both
globally and in the United Stateswith large deals
leading the way. Asia also reached a new record,
with activity for the first time virtually tied with
Europe as the second-busiest region for M&A.
By the numbers, more than 7,500 deals with a
combined value of over $4.5 trillion had been
announced as of this writing (Exhibit 1)on track
to exceed 2014 deal volume by 8 percent and
deal value by 37 percent, and eclipsing the record of
activity set in 2007. North American acquisitions
accounted for more than 50 percent of global deals
by value, while year-on-year growth of deal value
in Asia over the first 11 months of 2015 exceeded the
previous 11 months by nearly 60 percent.

But the big story in 2015 is around big deals.

Megadealsthose valued at more than $10 billion
were up by nearly 130 percent by value year on
year during the first 11 months of the year. Large
deals, with a value between $5 billion and
$10 billion, were up 24 percent, while small deals
increased by about 10 percent. Announcement
effects for acquirers in large deals, which went positive in 2013 for the first time in our records,
dipped only slightly in 2015 as many investors continued to welcome announcements of large
deals (Exhibit 2). Traditionally, such announcement
effects have been a poor indicator of a deals
eventual value. For instance, our analysis of past
deals has found no correlation between shareprice movement in the days after a deal is announced

MoF 2016
M&A 2015
Exhibit 1 of 2

Exhibit 1

Global M&A sets a new record.

Value of announced deals,1 $ billion
25% p.a.

4,894

4,499
670
3,154
236

1,943
1,220

1,699

1,885

1999

2007

1,130

Asia-Pacific

1,147

Europe, the Middle East,

and Africa

3,560
2,504

2,669

806

507

569

970

761

804

1,236

1,296

2012

2013

2,617 Americas
1,784
20152

2014

MoF 2016
M&A 2015
Exhibit 2 of 2

1 Includes deals with value of more than $25 million only. Figures may not sum, because of rounding.
2 Data extrapolated to show expected results for entire year based on announced activity (not withdrawn) through Nov 30, 2015.

Source: Dealogic; McKinsey analysis

Exhibit 2

Many investors continue to react well to large deals.

Deal value added (DVA),1 target and acquirer,
large deals $5 billion, %
15
Target DVA

10
5

Total DVA

0
5

Acquirer DVA
10
15
20
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

YTD
20152

1 For M&A involving publicly traded companies; dened as combined (acquirer and target) change in market capitalization,

adjusted for market movements, from 2 days prior to 2 days after announcement, as % of transaction value.

2 Based on large-deal data from Jan 1 to Nov 30, 2015.

Source: Datastream; Dealogic; McKinsey analysis

and a companys excess total return to shareholders two years after a deal, when most synergies
are captured.
Why do many investors continue to applaud big
deals? It could be a change in the types of deals. In
the past, big deals were often seen as tactics to
address cost reduction and industry consolidation
and many still are. But today we also see deals
where managers and boards are talking about diversification and, for the first time in a long time,
about revenueabout cross-selling and creating
new customer opportunities, and about transformation. Some of that has always been part of the
rationale for big deals, but given continuing strong
announcement effects, it may be that investors

are more receptive to it. Companies may also

be getting better at integration and capturing deal
synergies. In our observation, the discipline,
professionalism, and capabilities around integration
have certainly improved.
The authors wish to thank Roerich Bansal for his
contribution to this article.
Werner Rehm is a master expert in McKinseys
New York office, and Andy West is a director in the
Boston office.
Copyright 2015 McKinsey & Company.
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