Synergies Take Center Stage: 2018 M&A Report (Boston Consulting Group)

Summary

• Deal value in 2017 was in line with 2016 but fell 27% from 2015's record level, with about 36,000 deals announced.§3
• Megadeals dropped more than 50% from 2015.§3
• First-half 2018 total deal value was $1.7 trillion, with more than 16,000 deals globally.§4
• Buyers announced 22 megadeals in the first half of 2018, almost twice the historical average.§4
• Buyers now keep less than half of the synergy potential, versus two-thirds historically.§2
• US tax reform cut the corporate tax rate from 35% to 21%.§5
• Acquirers' CARs averaged 0.3% in 2017, versus the historical average of -0.8%, while targets saw 18.9%.§6

Key insights

1. Synergy estimates in deal announcements have increased to a new high every year since 2013 in the 1,000 largest public-to-public deals.§2
2. Cigna agreed to acquire Express Scripts in a transaction valued at $69.8 billion.§4
3. T-Mobile US and Sprint announced a merger with an implied deal value of $26.8 billion.§4
4. Walmart acquired Flipkart for $16 billion, beating a bid by Amazon.§4
5. Under the new 21% rate, after-tax proceeds from asset sales will increase by up to 22%.§5
6. For the S&P 500, earnings per share are expected to increase on the order of 12% to 16% from lower effective tax rates.§5
7. The share of activist campaigns targeting large-cap companies rose to 28%, versus a five-year average of approximately 20%.§6