Mixed results for 2017 deal activity

The first week of 2018 has already seen a couple of sizable deals announced. The year seems to have picked up from the last couple of weeks of 2017, when two of the year’s largest deals were announced; the USD 77bn acquisition of CVS Health by Aetna Inc. and the USD 66.1bn acquisition of Twenty-First Century Fox by Walt Disney. However, even with these two mega deals announced in the final couple of weeks of 2017, activity for the year ebbed and flowed quite a bit, but couldn’t match either 2016 or 2015’s record year in terms of globally announced deal activity.

Given that 2015 deal levels were higher than the previous record year of 2007, and taking into account the ongoing geopolitical turmoil seen in 2016 and 2017, it is really no surprise to see that 2017 showed a 3 per cent decline in deal value, which dropped to USD 4.7tn, from USD 4.8tn in 2016. The “mega” deals still took place; 32 deals greater than USD 10bn were announced in 2017, compared with 37 such deals in 2016. It was the total number of announced deals that showed the biggest year-on-year drop (8 per cent) since the decline experienced between 2007 and 2008 (11.6 per cent).

While taken on face value 2017 looks disappointing, what we can’t lose sight of is the fact that the value of announced deal activity seen since 2014 has surpassed all other years on record, with the exception of 2007. As such, we need to look at 2017 in the broader context of what we have seen in the last 10 years. The most positive outcome from 2017 was global PE activity; the value of deals announced in 2017 reached USD 753bn, the highest level recorded since 2007, and included a number of high value deals, the largest being the USD 20bn institutional buy out of Calpine Corporation in August by Energy Capital Partners, Access Industries and the Canada Pension Plan Investment Board, proof that firms are willing to use some of their dry powder for the right companies.

As always seems to be the case in today’s world, a number of geopolitical uncertainties are still impacting deal makers. However, as global stock markets continue to perform well, there is still an appetite for deals, as we have already seen early in 2018.