3 | The Deloitte M&A Index Q3 2014 Factors influencing M&A in Q3 2014 Withdrawn deals Figure 4. Withdrawn deal volumes and disclosed deal values ($bn) The M&A market saw $216 billion of (Q1 2008 – Q2 2014) withdrawn deals within the first six months of Deal volumes Disclosed deal values ($bn) the year. Deloitte estimates that on average 450 180 around 3% of deals are withdrawn each year 400 160 and 2014 is no different. The key difference 350 140 this year is that a handful of high profile deals 300 120 account for the majority of the withdrawn 250 100 deal values. For instance, one high profile 200 80 pharmaceutical deal alone accounts for 150 60 43% of total withdrawn deals by value. 100 40 50 20 0 0 2008 Q12008 Q22008 Q32008 Q42009 Q12009 Q22009 Q32009 Q42010 Q12010 Q22010 Q32010 Q42011 Q12011 Q22011 Q32011 Q42012 Q12012 Q22012 Q32012 Q42013 Q12013 Q22013 Q32013 Q42014 Q12014 Q2 Quarter Deal volumes Disclosed deal values ($bn) Source: Thomson Reuters; Deloitte analysis Animal spirits Figure 5. Disclosed deal values and deal premiums of withdrawn deals Such high profile deal withdrawals also (Q1 2010 – Q2 2014) point to a trend of rising hostile bids. It is Disclosed deal value ($bn) Deal Premium indeed striking that of the deals that were 140 60 withdrawn this year, the average premium 120 offered was 27x compared with the average 50 deal premium of just 13x for announced 100 40 deals. Looking ahead, it seems likely that 80 getting deals to completion, particularly for 30 60 larger deals, is going to get more complex 20 due to increased political and regulatory 40 scrutiny, wider stakeholder interests and rising 20 10 valuations. Going hostile is an expensive 0 0 alternative and fraught with problems, but it also indicates that animal spirits are returning. 2010 Q12010 Q12010 Q22010 Q22010 Q32010 Q32010 Q42010 Q42011 Q12011 Q12011 Q22011 Q22011 Q32011 Q32011 Q42011 Q42012 Q12012 Q12012 Q22012 Q22012 Q32012 Q32012 Q42012 Q42013 Q12013 Q12013 Q22013 Q22013 Q32013 Q32013 Q42013 Q42014 Q12014 Q12014 Q22014 Q2 Quarter Disclosed deal value ($bn) Deal Premium Source: Thomson Reuters; Deloitte analysis