Mergermarket trend report Q1 2016

US Midwest

The US Midwest had a mixed start to the year, with 210 deals valued at US$ 87.6bn for Q1 2016. The figures represent a 28.2% decrease in value and a drop of 16 deals from Q1 2015 (US$ 121.9bn, 226 deals). Nevertheless, the quarter achieved a 102.4% increase over Mergermarket’s quarterly historic average for the Midwest (US$ 43.3bn). The region also captured one of its highest percentages of the overall US market share for the quarter on record (since 2001) – 36% of the country’s Q1 2016 total – the third-highest in Mergermarket history.

Illinois is the first-place state by both deal value and count amongst the Midwest states with 51 deals worth US$ 45.1bn, representing 51.5% of the region’s total value, and the third-largest quarterly share for the Prairie State since Q3 2007 following Q1 2015 (US$ 90.1bn) and Q4 2012 (US$ 59.8bn). Illinois’ strong showing can be attributed to hosting the top deal, Ireland-based Shire Plc’s acquisition of US pharmaceutical giant Baxalta Inc. for US$ 35.2bn, which represented 78% of Illinois’ total value and 40.2% of that of the whole of the Midwest.

Such deals as Shire/Baxalta above have followed a trend in the last few years known more popularly as tax inversions; moreover, such transactions have tended to occur in the pharmaceutical industry. However, the US Treasury Department’s recent announcement that it would further amend

sector’s Midwest performance. The second- and third-largest historical quarterly valuations, which were similar in worth – US$ 15bn in Q1 2011 and US$ 14.5bn in Q2 2005 – saw the remaining quarters of their respective years result in significantly lower values.

Despite recording lower values than in Q1 2015, one could still argue that the Midwest has had a somewhat successful showing based on its market share of overall US value and its share above its own quarterly regional historic average. However, as stated above, similar scenarios have occurred previously, with the result being that the region has found it difficult to sustain these high percentages; therefore, it should not be surprising if the remaining quarters were to see lower values.

rules related to the taxability of corporate profits abroad has had the immediate result of the break-up of the Pfizer/Allergan deal – a fate which could thus await Shire/Baxalta – making it likely that tax inversions may become less common as their chances of success are now looking more glum. Previous attempts by the Treasury to dissuade companies from engaging in tax inversions in 2014 and in 2015 had failed, but, it seems, the third time’s the charm. A second potential result from the new regulations could be downward pressure on deal values, making it less likely for market shares to be inflated by one gargantuan deal.

That said, Pharma, Medical & Biotech (PMB) had the highest value of all sectors in the Midwest in Q1 2016, with 25 deals worth a total of US$ 39.4bn, largely due to the Shire/Baxalta deal. As a result, PMB increased 72.3% from Q1 2015 (US$ 22.9bn) despite seeing nine fewer deals, coming as no surprise considering the latter transaction comprised 89.3% of the sector’s total value for Q1 2016.

Energy, Mining & Utilities (EMU) holds the second-highest value of the region’s sectors with US$ 15.2bn across 10 deals, up a staggering 767.7% by value and with two more deals than the eight in Q1 2015 worth a total of US$ 1.7bn. This is the highest-valued quarter for EMU on Mergermarket record for the region, and is 433.1% higher than the US$ 3bn historical average for the

The UK has been central to Europe’s overall M&A activity so far in 2015, contributing a 38.7% share to the regions total deal value, up from a 14.5% during the same period in 2014, and its highest stake on record (since 2001). The 1,004 deals worth £170bn announced to-date have already overtaken 2014’s full value (1401 deals, £94.8bn) by 79.2%, marking the highest annual total since 2007 (1,528 deals, £171.4bn).

Deal activity was bolstered by the highest valued H1 period on record (£136.5bn) whilst deal value in Q3 dropped to £33.5bn during the traditionally slow summer months. Despite showing a 59.7% decrease compared to Q2 (325 deals, £83.0bn), Q3 deal value increased by 81.6% compared to Q3 2014 (311 deals, £16.8bn).

According to Mergermarket intelligence, the turmoil surrounding the Greek economy and the consequentially weakened euro has pushed investors to be more confident when entering UK transactions. This year, inbound M&A has reached a record value at £138.6bn, up 118.7% by value compared to the whole of 2014, and overtaking all annual totals on Mergermarket record. France by comparison has recorded £42.4bn-worth of inbound deals to-date, down 41.7% by value compared to the same period in 2014 (185 deals, £72.8bn).

2US Midwest trend report Q1 2016www.mergermarket.com

US Midwest

Quarterly M&A value Sector breakdown State breakdown

0

50

100

150

200

250

300

350

400

2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1 2016

Valu

e of

dea

ls (U

S$ b

n)

Illinois Michigan Ohio Minnesota Missouri Wisconsin Rest of the region

2007

2008

2009

2010

2011

2012

2013

2014

2015

Q12016

Value of deals ($bn)Q1 Q2 Q3 Q4

US$ 87.6bnUS$ 373.2bn

US$ 232.2bn

US$ 86.9bn

US$ 146.7bn

US$ 127.7bn

US$ 109.9bn

US$ 173.4bn

US$ 278.1bn

US$ 240.7bn

22.9

1.8

10.8

1.5

1.1

0.4

56.0

27.4

39.4

15.2

13.8

6.5

5.5

3.7

1.8

1.6

0 10 20 30 40 50 60

Pharma, Medical &Biotech

Energy, Mining &Utilities

Industrials &Chemicals

Real Estate

Financial Services

Technology

Consumer

Other

Deal value ($bn)Q1 2016 Q1 2015

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Top deals

Deal value

(US$m)

Ann.date

Bidder company Bidder country Buy-side

advisorsTarget

companyTarget sector

Sellercompany Sell-side advisors

35,219 11-Jan-16 Shire Plc Ireland (Republic)

FA: Barclays; Deutsche Bank; Evercore Partners; Morgan

Stanley

LA: Arthur Cox; Cravath, Ropes & Gray; Slaughter and May; Swaine & Moore; Advising FA: Freshfields

Bruckhaus Deringer

Baxalta Inc Pharma, Medical, Biotech

FA: Citi; Goldman Sachs

LA: Jones Day; Kirkland & Ellis; Skadden Arps Slate Meagher & Flom; Advising FA: Fried Frank

Harris Shriver & Jacobson; White & Case

11,305 9-Feb-16 Fortis Inc Canada FA: Goldman Sachs; Scotiabank

LA: Davies Ward Phillips & Vineberg; White & Case; Advising

FA: Osler, Hoskin & Harcourt; Skadden Arps Slate Meagher &

Flom

ITC Holdings Corporation Energy, Min-ing & Utilities

FA: Barclays; Lazard; Morgan Stanley

LA: Jones Day; Simpson Thacher & Bartlett; Advising FA: Kirkland

& Ellis

10,838 20-Mar-16 The Sherwin Williams Company USA FA: Citi; JPMorgan

LA: Jones Day; Weil Gotshal & Manges; Advising FA: Kirkland &

Ellis; Advising Debt Providers: Davis Polk & Wardwell

The Valspar Corporation Industrials & Chemicals

FA: Bank of America Merrill Lynch; Goldman Sachs

LA: Wachtell, Lipton, Rosen & Katz

6,500 12-Mar-16 Anbang Insurance Group Co Ltd China FA: -

LA: Skadden Arps Slate Meagher & Flom

Strategic Hotels & Resorts Inc Real Estate Blackstone Group LP FA: -

LA: -

3,338 26-Jan-16 Huntington Bancshares Inc USA FA: Goldman Sachs

LA: Wachtell, Lipton, Rosen & Katz; Advising FA: Fried Frank

Harris Shriver & Jacobson

FirstMerit Corporation Financial Services

FA: Sandler O'Neill & Partners

LA: Jones Day; Sullivan & Cromwell

US Midwest trend report Q1 2016www.mergermarket.com

US Midwest

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Legal advisor league table by deal count

Ranking Company name Q1 2016

Q1 2016

Q1 2015

Value (US$m)

Deal count

Count change

1 1 Kirkland & Ellis 71,794 32 -5 2 2 Jones Day 69,715 26 8 3 3 Skadden Arps Slate Meagher & Flom 71,547 13 -4 4 24 DLA Piper 959 11 5 5 49 McDermott Will & Emery 289 11 8 6 9 Latham & Watkins 1,810 9 -2 7 64 Morgan Lewis & Bockius 595 9 7 8 6 Ropes & Gray 38,092 7 -5 9 4 Sidley Austin 987 7 -10

10 58 Locke Lord 459 7 4 11 25 Cravath, Swaine & Moore 48,108 6 1 12 27 White & Case 47,274 6 1 13 34 Simpson Thacher & Bartlett 32,507 6 2 14 7 Weil Gotshal & Manges 10,838 6 -6 15 5 Goodwin Procter 1,266 6 -8

Legal advisor league table by value

Ranking Company name Q1 2016

Q1 2016

Q1 2015

Value (US$m)

Deal count

% Value change

1 3 Kirkland & Ellis 71,794 32 -4.2%2 11 Skadden Arps Slate Meagher & Flom 71,547 13 141.1%3 36 Jones Day 69,715 26 2,132.3%4 46 Arthur Cox 51,385 2 2,134.1%5 5 Cravath, Swaine & Moore 48,108 6 -20.8%6 8 White & Case 47,274 6 42.0%7 74 Fried Frank Harris Shriver & Jacobson 38,557 2 7,611.4%8 13 Ropes & Gray 38,092 7 48.1%9 68 Freshfields Bruckhaus Deringer 37,378 4 5,239.7%

10 - Slaughter and May 35,219 1 - 11 29 Simpson Thacher & Bartlett 32,507 6 285.5%12 10 Wachtell, Lipton, Rosen & Katz 30,342 5 -1.2%13 2 Sullivan & Cromwell 22,424 4 -71.9%14 48 A&L Goodbody 16,166 1 879.8%15 1 Davis Polk & Wardwell 11,615 4 -88.4%

Financial advisor league table by deal count

Ranking Company name Q1 2016

Q1 2016

Q1 2015

Value (US$m)

Deal count

Count change

1 2 Goldman Sachs 85,055 11 -4 2 1 JPMorgan 27,642 10 -5 3 15 Robert W. Baird & Co 1,725 9 3 4 11 Citi 68,427 8 1 5 7 Barclays 66,678 8 0 6 37 Evercore Partners 45,075 7 5 7 8 Jefferies 2,665 7 -1 8 4 Houlihan Lokey 1,793 7 -4 9 19 Piper Jaffray & Co 628 7 2

10 10 Lincoln International - 7 -1 11 5 Lazard 27,746 6 -4 12 30 Raymond James & Associates 321 6 3 13 3 Morgan Stanley 49,236 5 -7 14 33 UBS Investment Bank 4,930 5 3 15 9 William Blair & Company 1,005 5 -3

Financial advisor league table by value

Ranking Company name Q1 2016

Q1 2016

Q1 2015

Value (US$m)

Deal count

% Value change

1 6 Goldman Sachs 85,055 11 259.5%2 11 Citi 68,427 8 578.4%3 9 Barclays 66,678 8 406.0%4 4 Morgan Stanley 49,236 5 -16.4%5 25 Evercore Partners 45,075 7 4,669.8%6 19 Deutsche Bank 35,219 2 556.2%7 2 Lazard 27,746 6 -62.5%8 3 JPMorgan 27,642 10 -57.6%

9= 1 Centerview Partners 16,166 1 -79.9%9= - Mizuho Trust & Banking 16,166 1 - 11 - Scotiabank 11,305 1 - 12 5 Bank of America Merrill Lynch 10,838 1 -54.5%13 15 UBS Investment Bank 4,930 5 -39.3%14 33 Sandler O'Neill & Partners 4,372 2 1,209.0%15 13 Moelis & Company 3,270 4 -62.9%

US Midwest

US Midwest trend report Q1 2016www.mergermarket.com

Q1 2016

5

US Midwest

US Midwest trend report Q1 2016www.mergermarket.com

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Trend report criteria

All data is based on transactions over US$ 5m and is based on Mergermarket’s M&A deals database.Deals with undisclosed deal values are included where the target’s turnover exceeds US$10m.Deals where the stake acquired is less than 30% will only be included if the value is greater than US$100m.

All values are in US$.

Data correct as of 04-Apr-2016.

M&A trend: Based on the dominant geography of the target company being Midwest. All trend data excludes lapsed and withdrawn bids.

Top deals: Based on the dominant geography of the target company being Midwest. FA refers to financial advisor and LA refers to legal advisor. Excludes lapsed and withdrawn bids.

Industry analysis: Based on the dominant sector and geography of the target company. Excludes lapsed and withdrawn bids.

League tables: Based on the dominant geography of the target, bidder or seller company being Midwest. Financial advisor tables exclude lapsed and withdrawn bids. Legal advisor tables include lapsed and withdrawn bids.

Mid-West includes: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin.