Megadeals push Cross-Border M&A Index to record high

Cross-border deal values in the fourth quarter of 2015 rose to the highest level ever recorded in a single quarter, fueled by megadeals such as Pfizer’s purchase of Botox maker Allergan for US$183.7bn and Anheuser-Busch InBev’s US$120.3bn merger with SABMiller. These deals, if they clear regulatory hurdles, will not only turn Pfizer into the world’s largest drug maker by sales and create a combined company that controls one-third of the global beer market, but pushed Baker & McKenzie’s Cross-Border M&A Index to a record high of 331.

The Index, which tracks levels of cross-border M&A activity back to Q1 2010 using a baseline score of 100, was boosted by US$390.1bn in Q4 2015, in deals involving buyers and targets based in different regions, up 31% over cross-regional deal values in Q4 2014. The largest such deal was US-based Pfizer’s merger with Ireland-based Allergan, a transaction that represented 31% of all cross-border activity in Q4 and is the largest healthcare deal ever.

The value of cross-border deals within regions also rose in Q4, reaching a total of US$207.3bn — more than double the same quarter a year ago. The largest such deal was Belgium-based Anheuser-Busch InBev’s acquisition of UK-based SABMiller, a merger that could lead to another round of transactions as ABI tries to satisfy European competition regulators by selling off SABMiller’s stake in MillerCoors, as well as the Peroni and Grolsch brands.

Despite total deal values reaching a record-breaking US$597.4bn in Q4, the number of cross-border transactions fell 20% to 1,224 deals, down from 1,537 in Q4 2014. This drop in the number of deals was consistent across regions and sectors, suggesting that despite the boldness of buyers at the top of the market, other firms are exercising more caution amid continued instability in Europe, economic slowdowns in China and Brazil, and lower commodity prices.