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Top 5 sectors for M&A in 2015


Consolidation is a buzzword that peppers most conversations about the future growth and long-term strategy of the global financial services sector.

A volatile global macro-economic situation and an evermore complex regulatory environment in most jurisdictions means many companies, from wealth management groups to asset managers and non-bank lenders, are constantly searching for scale and growth.

financial servicesYet, despite this structural shift, the aggregate value of financial services mergers and acquisitions (M&A) only reached £215 billion this year, according to Zephyr. This is some way off the £337-billion peak in 2007, meaning there could be more deals to come.

According to Michael Frieser, Europe, Middle East and Africa (EMEA) head of financial institutions, corporate and investment banking at Bank of America Merrill Lynch, there have been very few strategic expansion-led deals this year.

“Most of the transactions have been about banks… disposing of non-strategic parts of their business,” he says. “Nobody in Europe has large-scale M&A at the core of their strategic agenda at the moment. Banks are by and large focusing on the regulatory impact, the fintech challenge, building their capital base and in some instances dropping market positions that are unsustainable.”

Another senior US investment banker says many financial services groups, particularly in Europe, are keeping their powder dry and waiting for a more predictable regulatory environment and says if there is “enough support to do transactions” then there could be “a last round of consolidation in Europe in the next couple of years”.

David Lomer, J.P. Morgan’s co-head of M&A for Europe, the Middle East and Africa says that in this sector as in others, M&A is like a “coiled spring” adding: “You can go through periods of relative inactivity, but where there is underlying strategic logic the tension will invariably be released.”


There is no other sector that has captured the headlines for mega-deal M&A as much as pharmaceuticals this year. From the United States to Europe and Asia, the makers of drugs and compounds have been scouring the globe for deals in a ceaseless hunt for the next blockbuster medicine.

telecomsIt is an “arms race” driven by pharmaceutical companies’ growing need for scale, new markets, efficiency and bumper pipelines of new drugs.

Data from Zephyr shows the value of M&A transactions carried out in the pharmaceutical product and preparation sector jumped from £58 billion in 2007 to £239 billion in 2015. This reflects a sharp rise of more than 400 per cent and showcases the evolution taking place in the sector.

There is no other sector that has captured the headlines for mega-deal M&A as much as pharmaceuticals this year

However, bankers point out that while there has been a marked an increase in high-value mega-deals, the volume of pharmaceutical transactions has remained relatively flat. A point backed up by Zephyr whose data shows that between 2007 and 2015 the volume of pharma M&A deals increased from 860 to 919 – a rise of less than 7 per cent.

Many of these mega-deals have been driven by US inversion rules, which allow for significant tax savings and explain why Pfizer, the giant American drug company, struck a $160-billion deal last month to merge with Allergan.

According to Thomson Reuters, if the combination of Pfizer and Allergan completes, it will not only become the largest pharmaceutical deal in history, but will rank as the second largest M&A transaction of all time.

Gustav Ando, a research director for IHS Life Sciences, says the deal represents a “sensational transformation of the global pharmaceutical industry”, adding that the sheer scale of the transaction would be likely to trigger more deals in the sector next year.


Size has always mattered in the word of telecoms, a sector which has long been driven by transformational M&A activity. More than $60 billion of acquisitions were carried out in the first half of this year alone, with Zephyr recording a total value of £231 billion of transactions in 2015. This is already double the total achieved in 2007 when £105 billion-worth of deals were sealed.

Many telecoms companies are also finding that joining forces makes sense at a time when everyone in the industry faces highly capital-intensive demands for investment

Corporate deal-making in this sector, in Europe and further afield, is driven by both the pressure to create economies of scale and the convergence of services as consumers increasingly demand interplay between their fixed line and mobile devices.

pharmaceuticalsMany telecoms companies are also finding that joining forces makes sense at a time when everyone in the industry faces highly capital-intensive demands for investment in technology and building networks. Investment spending is often essential when research and development means new technology is constantly disrupting the market.

According to a senior industry executive, telecoms companies in Europe have only just started to build 4G, but are already having to discuss plans for 5G. “Size matters, otherwise you cannot make these huge investments,” he says.

More consolidation is expected, particularly in Europe, but as this is a sector where the risk of harming consumers through ill-advised M&A is high, regulators are keeping a keen eye on any transactions. Regulators are particularly anxious to avoid a situation where strategic M&A activity could cause prices to rise for consumers.


The world of computer manufacturing is big, incorporating everything from the creation of PCs and other hardware to semiconductor chips and electronic components.

Companies that can provide complex technological expertise, particularly semiconductor equipment, have been particularly hot commodities at a time when development costs are rising.

computer manufacturingThis is why Avago Technologies of Singapore swooped on rival chipmaker Broadcom in a multi-billion-dollar deal, which has drawn regulatory scrutiny, but will be the largest merger of chipmakers in history.

Economies of scale as well as the need to diversify, another driving force in this sector, is also why Intel, the world’s biggest chipmaker and a Silicon Valley stalwart made a $16.7-billion swoop for Altera.

Intel makes PC chips and sells most of those used in computer servers, while Altera provides the chips used in mobile devices and cars.

Woodside Capital Partners, a global independent investment bank, says electronic equipment, instrument and components are currently dominating global M&A activity in this sector, with mergers involving semiconductor manufacturers not far behind.

There are likely to be more deals to come. As Steve Mollenkopf, chief executive of Qualcomm, which is another major provider of connectivity chips for smartphones, says: “I think there’s going to be a tremendous amount of growth in computing and resources dedicated to supporting the cloud. We look at that as an opportunity for a company like ours.”


There is perhaps no other sector which is currently facing such difficult market conditions as oil and gas. This is an industry which has been thrown into turmoil by plunging oil prices, which are still below a once-unthinkable $50 a barrel benchmark. Goldman Sachs has even warned that that the oil price could sink to $20 a barrel.

Oil and gasSuch volatility is placing severe cost pressures on the industry from the explorers to the large oil majors, and is leading to structural change and strategic deal-making.

Data from Zephyr shows the value of M&A in the oil and gas sector this year hit £134 billion, compared with £73 billion in 2007. This year has even produced what Michael Hulme, who runs a Carmignac Gestion commodities fund, dubbed the “big cahuna” of deals, Shell’s proposed £43-billion takeover of BG Group.

The fund manager says, although he had a nat­ural scepticism about whether mega-mergers of oil companies created significant synergies, M&A activity was only likely to increase. It could take time, however. “There is still too much vari­ance [in prices], but if oil prices stabilise at $50 to $60, it is much more likely that more deals will be struck,” he says.

James Peterkin, EMEA co-head of oil and gas at Barclays, agrees and says, while much of the activity this year has been focused on asset disposals, large transformational deals in 2016 could hinge on valuations. “A lot of this year has been about adjusting to the shock of the oil prices on the screen,” he says. “We think it could stay at around $50 a barrel next year before start­ing to pick up thereafter. If oil prices stay down for a longer period, then people may start look­ing at wider options for M&A.”