Acquisition and Predictive Analysis

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It’s been a busy year for mergers and acquisitions, with a number of billion dollar deals that happened. We tracked and analyzed over 700 Mergers & Acquisitions that occurred in 2017 and extracted the 20 largest deals across 9 industries, valued above $5 B.

  1. $274.9B in large M&A transactions took place in 2017.
  2. 42% of the transactions occurred in the Medical/Pharma Sector totaling $86.6 B across 8 events.
  3. 21% of the transactions occurred in the Energy Sector totaling $28.3 B across 4 events.
  4. The largest acquisition in the most active sector: Medical equipment/Pharma was J&J | Actelion at $30B.
  5. The largest acquisition in the second most active sector: Energy Sector was Sempra Energy |Energy Future Holdings at $9.45 B.
  6. One notable standout was CVS Health| Atena in the Health Plan Sector at $77 B.

M&A-by-sector-2017_chart

M&A_Deals_above_$5 B

Predictive Analysis

One useful predictive analysis technique, related to pending M&A events, is to look for large divergences between Return on Research Capital (RORC) and Goodwill-to-Asset-Ratio.

A downturn in RORC with an uptick in Goodwill-to-Asset-Ratio may suggest that a company is positioning itself for acquisitions.

For example, analyzing the Broadcom portfolio clearly reveals a trend shift in Goodwill-to-Asset-Ratio from 2012 on, when compared with the organic IP and R&D investment.

We see a large divergence between patent filings and Goodwill-to-Asset-Ratio. See the image below generated from MaxVal’s Patent LiveScapeTM.

MaxVal_Patent-LiveScape_Broadcom_screenshot

Goodwill-to-Asset-Ratio measures the percentage of a firm’s total assets attributable to goodwill on the balance sheet.

RORC is a metric used to assess the revenue a company brings in as a result of expenditures made on research and development activities.

While accessing historical M&A data could be useful, understanding the behavior pending M&A activity, by analyzing disparate sources of information is critical.

MaxVal can help you develop metrics customized to the way you think about the market. Contact us for a custom Entity Analysis Report.