The top five deals announced in Q1 2015 were all well above $10 billion. In comparison to last year, the number of mega deals announced, or acquisitions over $5 billion, doubled. Last year there were 14 mega deals in the first quarter and this year there were 28.
Despite the record-breaking activity of Q1 2015, global M&A in April 2015 slowed – both in terms of deal value and number of deals. Reports attribute that to the macro environment and instability in Europe and emerging markets. However, mega deals ─ many driven by consolidation ─ have still pushed up M&A value in multiple industries, including pharmaceutical and TMT.
What’s so important about these mega deals? Simply put, any large deal will certainly have an effect on the market. Significant transactions are like earthquakes. We’ll see aftershocks in the market in the form of divestitures and other acquisitions – both large and small – as businesses rush to stay relevant and adjust to industry changes.
Mega deals are also an indication of the trend I’ve previously talked about, the dumbbell effect; creating more very large and very small companies with fewer in between. The result is a void in the middle market and I anticipate a rush to fill that space.