Mega-deals finished the year with a bang

The fourth quarter of 2016 was a record-breaker for mergers and acquisitions in the Lone Star State

Texas businesses smashed all records when it came to mega-mergers, acquisitions and divestitures during the fourth quarter of 2016.

For the first time, the average value of merger and acquisition deals in Texas topped $1 billion during the final three months of last year, which is nearly triple the average during the same period in the previous three years.

There were 909 deals in 2016 in Texas, up slightly from 2015, but the value of the transactions exploded, according to Mergermarket, an independent data research firm. Mergermarket said combined value of last year’s mergers and acquisitions topped $450 billion, an increase of 50 percent from 2015 and 20 percent from 2014, the previous record.

“It was the year of the big deal and the year of the big finish,” said Chad Watt, an analyst at Mergermarket.

Many of the biggest deals occurred in the final few months of the year. The parade of mega-deals started in September, when the Canadian pipeline company Enbridge announced it was buying Spectra Energy for $41.4 billion. On Oct. 22, AT&T agreed to buy Time Warner for $105 billion. Nine days later, Baker Hughes and GE Oil and Gas announced a $31 billion merger.

In November, the pipeline company Energy Transfer Partners reached an agreement to merge with its sister company Sunoco Logistics in a deal valued at $51.4 billion, part

of an effort to simplify the number of publicly traded companies controlled by Energy Transfer Equity of Dallas.

“The fourth quarter had the highest deal values in history,” Watt said.

M&A activity in the fourth quarter was worth nearly $250 billion, accounting for about half the value of all 2016 deals. The average value of corporate transactions announced in October, November and December was $1.1 billion, more than twice as much as the average $493 million price tag of deals in the third quarter of 2016 and five times more than the $197 million average during the first half of 2016.

Of the 20 largest Texas deals announced in 2016, 10 were in the energy, mining & utilities sector; three were in business services; three were in media; two were in industrials & chemicals; and the rest were in consumer products and technology.

Jim Rice, a co-managing partner of the international law firm Sidley Austin’s Houston office, said the increased deals in the energy sector were a sign of the improved health and outlook of oil and gas companies, following a twoyear industry downturn. He said companies have sold assets, repaired balance sheets, and increased cash, setting the stage for more acquisitions this year.

“The industry is positioned to pivot from being in asset sale mode to asset acquire mode,” Rice said at a media roundtable discussion this week.

In particular, Rice said, there is great potential for deals for shale plays in the Permian Basin, the prolific Texas oil and gas producing region encompassing 48 million acres stretched over 75,000 square miles.

“There’s no question that the focus will be a strong following of the activity in the Permian,” Rice said.

Jim Griffin, a partner in the Dallas office of the Weil, Gotshal & Manges law firm, said he expected merger and acquisition activity to remain strong this year, especially in the technology industry.

“Buyers’ confidence drives the M&A market,” Griffin said. “When there’s confidence in the future, coupled with the need to show the public markets growth, M&A is a natural go-to to buy that growth.”