Value of Mega Deals on the Decline in 2016, But Deal Count Remains Steady

Decline in Mega Deals 2016 Q3

The blockbuster 2015 mergers and acquisitions market was largely driven by mega deals, defined as deals exceeding $10 billion.  Mega deals comprised 57.7 percent of the aggregate deal value last year, according to Bloomberg Law data.

In the first three quarters of 2016, however, mega deals comprised only 47.9 percent of aggregate deal value.  The aggregate value of mega deals in the third quarter of 2016 declined 9.1 percent quarter-over-quarter, while the aggregate value in large and mid-market deals remained relatively flat during the same period.

In addition, for the first time in over a year and a half, mega deals comprised less than 50 percent of the aggregate value of all deals exceeding $100 million during both the second and third quarters of 2016.

Deal Count Remains Strong

Even though the aggregate value of mega deals is down compared to recent years, deal count continues to be strong.  In the first three quarters of this year, more mega deals were announced (26) than in all of 2014.

It is unlikely, however, that 2016 will reach the same number of mega deals announced in 2015 (53).  In fact, in 2015, more mega deals were announced than in the previous three years combined.

Mega Deal Risk Update

Mega Deal Failure Rates

The mega deal does not come without risk, of course. From 2012 through the end of September 2015, over 27.5 percent of announced mega deals were terminated or withdrawn.

While not failing at the same rate as mega deals, during the same period, announced large deals ($1 billion - $10 billion) failed at an 11.9 percent rate, while mid-market deals ($100 million - $1 billion) failed at a rate of less than 4 percent.

Deals can fail for a variety of reasons, but our analysis indicates that as the size of the deal increases, so does the risk that the deal will not close.

For more on the latest trends in M&A, Bloomberg Law subscribers can access our Quarterly M&A Market Update.