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Mergers & Acquisitions

U.S. Public M&A – Highlights Q1 2017

The U.S. public M&A market was characterized by new announcements of smaller deals in the first quarter of 2017. Driven by the lowest average deal size since Q4 2013, U.S. public M&A dollar volume slowed by 56.2% in the first quarter of 2017 compared to the same period last year. Despite the decline in dollar volume, corporate lawyers and investment bankers remained busy as the number of deals involving publicly traded U.S. targets increased by 4.3% compared to the first quarter of 2016. There were $82.8 billion in new U.S. public deals announced during the first quarter. The consumer goods sector had the highest dollar volume during the quarter fueled by the $16.6 billion deal for Mead Johnson Nutrition Company (NYSE: MJN) by Rickett Benckiser Group plc. Morgan Stanley was the top ranked financial adviser during the quarter having advised on $39.4 billion in U.S. public deals. Goldman ranked second with $38.1 billion. On the legal adviser side, Kirkland & Ellis advised on $26.1 billion in new deals to take the number one ranking for the quarter.

Deal Point Trends - U.S. Public M&A
Q1 2017 Q4 2016
Avg. Unaffected Premium % 27.68 31.82
Avg. 1 Day Premium % 23.15 23.99
Avg. Acquirer to Target Termination Fee Multiple 1.63 1.51
Avg. Target Break Fee as % of Equity Value 3.71 3.33
Avg. Reverse Break Fee as % of Equity Value 5.45 4.85

Market Leaders - U.S. Public Mergers

Kirkland & Ellis was the top ranked legal adviser on U.S. public M&A deals announced in the first quarter of 2017. Skadden ranked second in the high profile public M&A advisory market.

Rank Firm Equity Value ($bil)
1 Kirkland & Ellis 26.1
2 Skadden 21.7
3 Davis Polk 18.4

M&A Adviser Fee Watch

Goldman, Sachs & Co. is off to another strong start for the first quarter of 2017 with a market leading $121 million in advisory fees already disclosed. $4.2 billion in 2016 M&A advisory fees involving U.S. public targets have been disclosed through March 31. Goldman led the market in 2016 with $507 million in fees disclosed. Morgan Stanley took second place among financial advisors in disclosed fees. JPMorgan rounded out the top three for 2016.

High-Yield Bond News

New Issue Volume

The pace of issuance of SEC registered high-yield new issues soared in the first quarter by 47.8% from the first quarter of 2016. During the first quarter, $20 billion in SEC registered high-yield bonds came to market in 28 new issues.

High-Yield Bond Covenants

The level of covenant protection strengthened during the first quarter, reversing its long decline. We evaluated the covenants in SEC registered new issues and found that 54% contained limitation on restricted payments provisions up from only 21% in Q1 2016. Limitations of indebtedness covenants were present in 64% of new issues compared to only 26% in deals priced in Q1 2016.