Written by edgaragentsdb on March 20, 2018

Since the 2008 financial crisis, activist investors have created previously improbable M&A combinations, broken up huge corporations and stopped some deals dead.

One example… AT&T and Time Warner plan to merge in a $85 billion deal that would unite one of the largest distributors of content with one of the biggest producers of content. Yet the mega-merger has to work it’s way through a powerful, if not outspoken, activist investor: The White House. The Trump administration has sued to block AT&T’s takeover of Time Warner. (True, the Administration is not a shareholder: instead presenting themselves as a stakeholder.)

This is just one of the predicted mega-mergers poised for 2018. A new Mergermarket survey states that “respondents broadly said that they expect more megadeals in the year ahead, with 12% saying they think the number will increase by more than 15 and 56% arguing there will be an increase of 5-15 transactions. There were a total of 129 deals globally worth US$4bn or more in 2017 and 133 in 2016, down from a peak of 158 in 2015. The total value of such deals last year was US$1.36 trillion.”

Last year, North America continued to enjoy the largest market share by value in global M&A, even though the total value of inbound and outbound deals in the United States decreased from 2016 levels. What actions can we expects from activists? Now that we have almost a month’s distance from 2017, we can assess and look forward, perhaps.

However, a groundswell of shareholder activism had a weighty effect on M&A in both the United States and Europe. Throughout 2017, habitually passive investors began to use activist-style tactics, and institutional investors, pension and retirement funds, labor unions, and special-interest shareholders canvassed for change in the companies they hold by pressuring target boards to pursue a sale or merge with another company, to divest a business, to push for a higher offer price for an already announced transaction, or to block a deal altogether.

Activism became a prominent feature of the corporate landscape, with activist funds raising and deploying record amounts of capital in 2017. In fact advisory firm Lazard reports that the amount of capital deployed by activists in new campaigns more than doubled from US$30.9bn in 2016 to $62bn in 2017.

Lazard noted that activists advocated for M&A or the outright sale of a company in 37% of the global activist campaigns mounted in 2017, making M&A the number one objective of activists. Technology, media, and telecommunications again ranked among the top sectors for deal value and volume, as technology companies looked to infiltrate new businesses and industrial companies sought to adopt new technologies through acquisitions.

Outbound M&A from China dropped by 5% in volume and declined 39% in value from 2016. The decline in 2017 was largely driven by the China government’s restrictions on capital leaving China, and in part by increased national scrutiny of the Chinese corporations that had a sequence of high-profile offshore acquisitions. Chinese regulators introduced rules and policies to slow down or stop the outflow of domestic Chinese capital to foreign markets as 2016 closed, impacting 2017. For 2018, the Chinese government continues to influence companies to restrict their overseas investments and only consider outbound if the opportunity is business-critical, and if the ROI will bring value back to China.

Global M&A activity achieved record levels in 2017 with aggregate transaction value reaching US$3.2tn and aggregate transaction volume rising to over 19,000, marking the most M&A deals announced in one calendar year on record.

Lastly, it’s important to understand that activists in 2018 will not only focus their attention on large-capitalized companies, but investing increasingly in small- and medium-cap targets. Companies of all sizes and across sectors will face shareholder activism, which in many cases prompted strategic M&A transactions.

Edgar Agents is pleased to work with companies across the globe, and our offices in both China and Israel are staffed with experts to help facilitate a M&A with our Virtual Data Room and, of course, filing a SEC Form S-4 filing.

Also, we know all mergers don’t success. That’s why we can offer an Abort Fee. Ask us.