Last year was the strongest year for M&A transactions since the financial crisis, according to law firm Allen & Overy’s latest M&A Index.
It found that ‘megadeals’ dominated in 2014, with 94 high-value global deals worth £5bn or more taking place during the course of the year – an 81% increase on 2013. Cross-border M&A transactions also reached their highest level since 2007.
Overall, there were 3,282 deals valued at more than $100m, which were worth a combined total of $3.12 trillion in 2014. This compares with 2,263 deals of a similar size, worth a combined $1.83tn, which took place in 2013.
The sectors that were most active in M&A were telecommunications, media and technology, and life sciences, closely followed by energy, which had a strong first quarter. The value of life sciences deals totalled $530bn and was driven by tax inversion strategies and patent cliffs as well as companies making strategic disposals and using cash on their balance sheets to invest in smaller biotech companies with active drug development pipelines.
Geographically, M&A activity was greatest in the US and Western Europe, followed by Asia Pacific. The US accounted for 34% of all activity by volume and 45% by value. The UK was the number one target for US outbound acquisitions with a total of 65 transactions, followed by Canada with 28 and Germany with 20. Strategic investors completed a majority of the deals in the US. They were either looking to extend their portfolios or to bolt on new areas of growth.
In contrast, activity in the Commonwealth of Independent States and Central and Eastern Europe slowed as a result of the Ukraine crisis.
Commenting on the findings, Andrew Ballheimer, global co-head of corporate at Allen & Overy, said: “2014 saw the much-anticipated return of M&A come to fruition. CEO confidence, relatively cheap financing and low interest rates drove a number of mega, transformative deals. These conditions, along with increasing numbers of hostile takeover attempts and positive shareholder reaction to M&A, should remain key drivers for deal activity, but there remains uncertainty in the macro-political environment, which may inhibit deal flow.”