Half-Year DEAL Edition DRIVERS AMERICAS The comprehensive review of mergers and acquisitions throughout the Americas. 2014 Published by: In association with: 03 CONTENTS Foreword 04 Technology, Media & Telecom 30 New England 58 Americas Heat Chart 05 Life Sciences & Healthcare 34 Latin America 62 All Sectors 06 Canada 38 About Merrill Corporation 66 and Merrill Datasite® Financial Services 14 West 42 Industrials, Manufacturing & Engineering 18 Midwest 46 Merrill Corporation Contacts 68 Energy, Mining, Oil & Gas 22 South 50 Notes 70 Consumer 26 Mid-Atlantic 54 ABOUT MERGERMARKET Mergermarket is an independent Mergers and Acquisitions (M&A) intelligence service with an unrivaled network of dedicated M&A journalists based in 62 locations across the Americas, Europe, Asia-Pacific, the Middle-East and Africa. Unlike any other service of its kind, Mergermarket specializes in providing forward- looking origination and deal flow opportunities integrated with a comprehensive deals database- resulting in real revenues for clients. Visit www.mergermarket.com. DEAL DRIVERS – AMERICAS 04 FOREWORD Welcome to the half-year 2014 edition of Deal Drivers Americas acquisition targets abroad. These firms are trying to stay ahead of published by Mergermarket in association with Merrill DataSite™. the competition by accessing cash overseas while strengthening This report provides a thorough examination and analysis of M&A their R&D departments through M&A. activity in North America and Latin America while also providing an in-depth view of recent trends and an outlook on some of the STIFF COMPETITION DAMPEN PE ACTIVITY M&A deal drivers in 2014. The first half of 2014 saw the number of North American buyouts reach 432 buyouts worth US$80bn from 371 transactions worth The first half of 2014 saw North American M&A reach 2,664 deals US$92bn in H1 2013, a 16% rise in volume and a 13% decrease in worth US$749bn from 2,109 transactions worth US$399bn in H1 value. Evidently the growth in the number of private equity deals 2013, a 26% rise in volume and 88% in value. compared to last year is not as extensive as the overall US M&A numbers. One factor that might be dampening activity for private This year’s activity boost suggests that the M&A revival that equity firms is competition from strategic buyers who are generally dealmakers have been waiting for has finally come to fruition. more willing to pay higher prices for assets and use stock-swaps Factors conducive to dealmaking, such as cash-rich corporates since the equity markets are doing so well. There is also the fact and low interest rates, were already in place over the last three that the mega buyouts of 2013 — ketchup maker HJ Heinz and years. What makes 2014 different? This time around the game computer company Dell — drove the value of private equity activity changer is CEO and boardroom confidence; these leaders are the upward in H1 2013. driving forces behind US companies’ renewed acquisitive stance. As firms continue to purchase targets that will help boost product However, there is still reason to be optimistic about private equity offerings and expand geographically, executives’ competitive streaks activity. For one, these firms continue to have a considerable are kicking in and have resulted in a market that is in the midst of amount of dry powder that they are eager to deploy. Exits also a buying spree. The specter of the European crisis and lingering increased considerably in terms of volume and value from H1 2013. uncertainty over the state of the economy that hovered over the US Mergermarket data shows that the first half of the year saw 485 M&A market in recent years have faded into the background as the exits worth US$156bn versus 319 exits worth US$53bn in H1 2013. market finally experiences its long-awaited turnaround. Additionally, the fundraising environment is looking rosy with most private equity funds hitting their targets. These factors are likely THINK BIG WITH TMT, LIFE SCIENCES AND HEALTHCARE going to positively influence future private equity activity. The life sciences and healthcare as well as TMT sectors dominated the top ten deals in H1 2014, considerably raising the overall value of OUTLOOK deals in North America. TMT had the top two deals with the highest The first half of the year witnessed an uptick in M&A activity values during the period while drug-related transactions saw five characterized by many as a revival — an event that dealmakers have deals in the top 10. been awaiting and predicting for at least three years now. Although some factors that should have spurred increased M&A have been Large-cap telecommunications deals — Comcast’s US$68bn present in recent years, the catalyst that has differentiated the first purchase of Time Warner Cable and AT&T’s US$65bn acquisition half of 2014 is the leadership in many corporations now having the of DIRECTV — led overall transactions in the first half. Through necessary confidence to pursue acquisitions. The next question is these acquisitions, both Comcast and AT&T are trying to grow their whether this so-called comeback is sustainable or just a part of the customer bases in cable, broadband and wireless internet services. cyclical ebb and flow of dealmaking. As consumers increasingly watch TV by live-streaming through their mobile devices, these companies have to constantly innovate, ramp up their distribution networks and offer increased connectivity between devices. The five Life Sciences and Healthcare deals, which include Medtronic’s almost US$46bn acquisition of Covidien, have all been driven by one common trend — companies wanting to lessen their tax burdens through corporate tax inversion. US firms, with biotech and pharmaceutical companies leading the way, are purchasing companies overseas to change their domiciles to countries like the UK and Ireland where tax-related expenses and rules are much less onerous than those in the US. What makes these companies particularly inclined toward doing tax inversion deals is the global nature of the industry that makes it easier to find attractive DEAL DRIVERS – AMERICAS 05 AMERICAS HEAT CHART The Heat Chart represents ‘companies for sale’ stories written Latin American activity is projected to develop particularly in the in H1 2014, based on Mergermarket proprietary intelligence. The Consumer sector linked to the increase in spending as the middle Heat Chart therefore serves as a barometer of potential deal flow class grows, incomes rise and urbanization occurs. in specific regions and sectors across the Americas. Keep an eye on the TMT and Consumer sectors, as well as regional ‘Companies for Sale’ stories written in the first half of 2014 totaled activity in the West, Midwest and Mid-Atlantic. 3,924. Sectors ripe for consolidation include TMT, Consumer and Energy, Mining and Utilities. Spurred perhaps by the TMT megadeals earlier this year, many companies are putting themselves on the block, hoping for attractive valuations. Regionally, the West replaced the South as the hottest region with a total of 893 stories. The South, however, was not too far behind with a total of 887, while the Midwest ranked third with 632. AMERICAS HEAT CHART - INTELLIGENCE Sector West South Midwest Mid-Atlantic LatAm New England Canada Total TMT 293 150 90 134 55 59 35 816 Consumer 112 91 91 88 99 14 30 525 Energy/Mining/Utilities 114 152 64 41 65 9 75 520 Industrials & Chemicals 67 97 154 56 66 36 24 500 Life Sciences & Healthcare 74 83 65 76 22 63 13 396 Business Services 93 101 54 38 37 21 14 358 Financial Services 58 88 49 66 22 36 12 331 Leisure 38 40 18 27 23 11 15 172 Construction 10 25 11 11 15 7 10 89 Transportation 11 19 14 13 18 4 1 80 Defence 10 30 8 10 0 9 0 67 Real Estate 7 7 3 9 7 1 3 37 Agriculture 5 3 7 0 5 0 4 24 Other 1 1 2 1 0 0 0 5 Government 0 0 2 0 1 0 1 4 Total 893 887 632 570 435 270 237 3,924 Hot Warm Cold The intelligence Heat Chart is based on ‘Companies for Sale’ tracked by Mergermarket in (USA and Canada) between 01/01/2014 and 99 66 33 06/30/2014. Opportunities are captured according to the dominant geography and sector of the potential target company. For definition 88 55 22 of states within regions, see page 70 (Note to Heat Chart). 77 44 11 Note: Mergermarket’s Heat Chart of predicted deal flow is based on the intelligence collected in our database relating to companies rumored to be up for sale, or officially up for sale in the Americas region. It is therefore indicative of areas that are likely to be active in the months to come. The intelligence comes from a range of sources, including press reports, company statements and our own team of journalists gathering proprietary intelligence from M&A practitioners across the region. The data does not differentiate between small and large transactions, nor between deals that could happen in the short or long-term. DEAL DRIVERS – AMERICAS 06 ALL SECTORS ALL SECTORS Market confidence supports more announced plans to acquire Time Warner it was called off this month. The deal could megadeals Cable for US$68.5bn. AT&T joined in on have been valued at well over US$32bn. the fun shortly thereafter announcing a Deal activity in North America is expected nearly US$65.5bn bid for DirecTV. And most As compared to performance in Europe to continue through the remainder of the recently, Time Warner rebuffed an US$80bn and Asia, the relative attractiveness of year at a pace that suggests M&A levels are bid by Rupert Murdoch’s 21st Century Fox.