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8th Annual Brunswick M&A Survey

Confidence in global M&A activity endures but dealmakers less bullish, says 8th annual Brunswick M&A survey.

Shareholder Activist Pressure Expected to Drive M&A Activity in North America

Results Announced to Coincide with Annual Tulane Law School M&A Conference

NEW ORLEANS, March 18, 2015 – After a banner year for merger and acquisition activity in 2014, leading dealmakers expect sustained strong volume in 2015, but are less optimistic than they were a year ago, according to the 8th Annual Brunswick Group M&A Survey. Fewer dealmakers expect global M&A activity to reach new heights, with just over half (54%) of respondents predicting it will increase in 2015, compared with 78% of those surveyed in 2014.

The survey polled 115 top M&A practitioners from North America, Europe and Asia. Results were released ahead of the Tulane University Law School 27th Annual Corporate Law Institute, an annual gathering of the M&A community that draws lawyers, bankers, Delaware judges and other market participants.

While deal activity in 2012 and 2013 did not meet optimistic predictions by dealmakers who responded to Brunswick’s M&A Survey in those years, M&A activity matched high expectations in 2014. Global M&A activity in 2014 reached $3.5 trillion, up 47% from the prior year. Given the recent announcements of major transactions such as AbbVie’s $21 billion planned acquisition of Pharmacyclics, Pfizer’s $17 billion agreement to acquire Hospira and NXP Semiconductors’ $17 billion proposed merger with Freescale, this year has the potential to be another solid one for deals.

In North America, the influence of shareholder activists on M&A activity is growing. Nearly three-quarters (73%) of dealmakers in North America believe shareholder activism will increase in 2015 and 62% cite pressure from activists as the number one factor that will drive M&A activity in the region. This focus on activism has more than doubled since 2012, when only 28% of dealmakers cited activists as the main driver of M&A activity. Outside of North America, only 9% of dealmakers in Asia and 19% of those in Europe believe activism will drive deal activity in 2015.

“After a record run for M&A in 2014, dealmakers have high hopes for the year ahead but are less bullish about surpassing levels seen last year,” said Steven Lipin, U.S. Senior Partner, Brunswick Group. “What’s different this year is that dealmakers believe activist shareholders are gaining influence and expect activist campaigns to be a key driver of deal activity in the coming year – meaning more divestitures, break-ups and spinoffs as well as outright sales and acquisitions.”

Other factors expected to drive North American M&A activity in 2015 include CEO/Board confidence (49%) and availability of credit and low interest rates (42%).

In 2015, one-third (34%) of dealmakers in North America believe activist shareholders are most likely to demand spinoffs, sales or divestitures over any other type of activist demand, such as Board representation (28%) or share buybacks and dividends (25%). Additionally, more than eight in ten (85%) dealmakers predict the level of direct engagement between Boards and investors will increase.

Other Notable Highlights from 2015 M&A Survey

  • Antitrust Concerns in Europe and Asia: Nearly two-thirds (65%) of dealmakers in Europe predict the level of antitrust scrutiny for deals in the region will increase relative to 2014, while 71% of dealmakers in Asia believe the same for deals in their region. On the other hand, antitrust risk is expected to remain unchanged in North America, as a majority of dealmakers (69%) see it staying at the same level as in 2014. Technology and telecom (57%) and healthcare (48%) are the industries that dealmakers in North America expect will receive the most antitrust scrutiny related to merger activity in 2015.
  • Mega-Deals, Leveraged Buyouts and Corporate Spinoffs in North America: According to a plurality (44%) of North American dealmakers, the level of mega-deals and leveraged buyouts is likely to remain the same in 2015, as compared to 2014, while 32% expect it to increase. Additionally, a majority (55%) of dealmakers in North America see the level of corporate spinoffs and divestitures in their region increasing in 2015, while 36% see it staying the same.
  • Active Sectors for Consolidation: Unchanged from last year’s survey, North American dealmakers feel the most active sectors for consolidation in 2015 will be healthcare (65%), followed by energy (59%). Among European-based dealmakers, the technology and telecom industry (81%) as well as the healthcare industry (75%) are predicted to be the most ripe for consolidation in 2015. Among dealmakers in Asia, the consumer goods and retail industry (65%) is at the top of the list for consolidation this year.
  • Deal Type Expected to Vary by Region: In terms of the types of deals in 2015, over two-thirds (68%) of dealmakers in North America expect domestic transactions among strategic buyers, while a majority (72%) of those in Europe expect inbound deals by foreign acquirers, particularly by North American companies. Practitioners in Asia predict M&A activity will be focused on outbound deals by domestic acquirers (43%).
  • Deals to Continue to Use Mix of Cash and Stock: Continuing the trend from 2014, the majority of dealmakers across all regions expect companies will use a mix of cash and stock for deals in 2015, including 58% in North America, 67% in Europe and 58% in Asia.

The 2015 survey included the views of 115 leading M&A lawyers, bankers and advisors from Brunswick’s proprietary database of M&A practitioners across North America, Europe and Asia, and was conducted February 17 – March 2, 2015. The results were analyzed by Brunswick Insight, the firm’s specialist opinion research and consulting practice, which focuses on understanding the views of opinion formers around the world.

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About Brunswick Group LLP

Brunswick Group LLP is the leading global M&A communications firm. We are a private partnership with a growing team of approximately 850 employees, including more than 130 partners around the world. The firm has grown organically over 25 years and now has 23 wholly owned offices in 14 countries.

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