并购浪潮：风险与回报

1、The M&A Wave: Risk & Reward IIAn updated review of leverage, ratings and spread performance of recent USD High Grade dealsA review of 45 M&A transactions since 2015 shows that deleveraging is occuring but slowly, and with some misses. A strong economy has helpedSince 2015, $833bn of Non-Financial HG

2、 corporate bonds has been issued to fund M&A. This accounted for 29% of all non-Financial bond issuanceOf the 27 M&A transactions where enough time has passed, our analysts conclude that 12 companies have succeeded in achieving their post-merger financial targets, 6 are on track, 2 are behind plan,

3、and 7 have not succeededAcross the 45 transactions leverage increased by 1.4x at the time of the deal, on average. It was 0.3x lower one year later and 0.5x lower two years laterRating downgrades at the time of the deals averaged 0.6 notches and they declined slightly further subsequently, on averag

4、eA 1.5x increase in leverage led to a one notch rating downgrade, on averageRecent deals have been larger in size but they have led to a smaller increase in leverage than those in prior years, a positive developmentInvesting in the bonds issued for these M&A transactions has been profitable, with a

5、median of 16bp spread outperformance six months later and 23bp of outperformance one year later, versus the broader marketIn this note we review the leverage, credit rating and spread performance trends of the 45 deals individually. Our analysts provide perspective on each transaction and on the M&A

6、 dynamic in the Healthcare, TMT and Consumer sectors more broadly. There is one page per deal explaining the rationale, the leverage and ratings implications and post deal deleveraging trends of eachNorth America Credit Research12 April 2019US High Grade Strategy & Credit Derivatives ResearchEric Be

7、instein AC(1-212) 834-4211 HYPERLINK mailto:eric.beinstein eric.beinstein Virginia Chambless, CFA (1-212) 834-5481 HYPERLINK mailto:virginia.chambless vi HYPERLINK mailto:rginia.chambless rginia.chamblessBrett G. Gibson(1-212) 270-7484 HYPERLINK mailto:brett.g.gibson brett.g.gibsonBrian Turner(1-212

8、) 834-4035 HYPERLINK mailto:brian.m.turner brian.m.turnerJonathan Rau, CFA(1-212) 834-5237 HYPERLINK mailto:jonathan.d.rau jonathan.d.rauClaire Barbour(1-212) 270-6861 HYPERLINK mailto:claire.barbour claire.barbourPavan D Talreja(1-212) 834-2051 HYPERLINK mailto:pavan.talreja pavan.talrejaSheila Xie

9、(1-212) 834-3036 HYPERLINK mailto:sheila.xie sheila.xieJ.P. Morgan Securities LLCGross Leverage3.8x3.7x+1.4x3.6x 3.6x3.5x3.4x3.4x3.3x 3.3x2.4xPost M&A deleveraging has been slow but steady4.0 x3.5x3.0 x2.5x2.0 x1.5x1.0 x0.5x0.0 xThe increase in leverage in recent M&A deals has been decliningPre-Deal

10、 LeveragePost-Deal Leverage+1.7x+1.4x+1.4x+1.1x5.0 x4.5x4.0 x3.5x3.0 x2.5x2.0 x1.5x1.0 x0.5x0.0 xSource: J.P. Morgan, Capital I.Q2015201620172018See page 63 for analyst certification and important disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. A

11、s a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. HYPERLINK / Table of Contents HYPERLINK l _bookmark0 Summary and co

12、nclusions: deleveraging progress HYPERLINK l _bookmark0 continues with some misses, newer deals have less HYPERLINK l _bookmark0 leverage4 HYPERLINK l _bookmark1 Why M&A matters7 HYPERLINK l _bookmark2 Healthcare & Pharma11 HYPERLINK l _bookmark3 Consumer Noncyclicals12 HYPERLINK l _bookmark4 Teleco

13、m/Media/Technology13 HYPERLINK l _bookmark5 Cigna Corp acquires Express Scripts Holding Co18 HYPERLINK l _bookmark6 Altria Group acquires 35% stake in Juul Labs & 45% stake in Cronos Group19 HYPERLINK l _bookmark7 CVS Health Corp acquires Aetna Inc20 HYPERLINK l _bookmark8 United Technologies Corp a

14、cquires Rockwell Collins Inc21 HYPERLINK l _bookmark9 Comcast Corp acquires Sky22 HYPERLINK l _bookmark10 Conagra Brands Inc acquires Pinnacle Foods Inc23 HYPERLINK l _bookmark11 Walmart Inc acquires 77% stake in Flipkart Online Services24 HYPERLINK l _bookmark12 Keurig Green Mountain Inc merges wit

15、h Dr Pepper Snapple Group Inc25 HYPERLINK l _bookmark13 AT&T acquires Time Warner Inc26 HYPERLINK l _bookmark14 Bayer acquires Monsanto Co27 HYPERLINK l _bookmark15 Northrop Grumman acquires Orbital ATK28 HYPERLINK l _bookmark16 General Mills Inc acquires Blue Buffalo Pet Products Inc29 HYPERLINK l

16、_bookmark17 General Dynamics Corp acquires CSRA Inc30 HYPERLINK l _bookmark18 Campbell Soup Co acquires Snyders-Lance Inc31 HYPERLINK l _bookmark19 Discovery acquires Scripps Networks32 HYPERLINK l _bookmark20 Becton Dickinson acquires CR Bard Inc33 HYPERLINK l _bookmark21 Crown Castle International

17、 Corp acquires Lightower34 HYPERLINK l _bookmark22 A Inc. acquires Whole Foods Market Inc35 HYPERLINK l _bookmark23 British American Tobacco PLC acquires Reynolds American Inc36 HYPERLINK l _bookmark24 Reckitt Benckiser PLC acquires Mead Johnson37 HYPERLINK l _bookmark25 Sherwin Williams acquires Va

18、lspar38 HYPERLINK l _bookmark26 Analog Devices Inc acquires Linear Technology Corp39 HYPERLINK l _bookmark27 Verizon Communications acquires Yahoo40 HYPERLINK l _bookmark28 Abbott Laboratories acquires St Jude Medical Inc41 HYPERLINK l _bookmark29 Microsoft Corp acquires LinkedIn Corp42 HYPERLINK l

19、_bookmark30 Oracle Corp acquires NetSuite Inc43 HYPERLINK l _bookmark31 Molson Coors Brewing Co acquires MillerCoors LLC44 HYPERLINK l _bookmark32 Anheuser-Busch InBev acquires SABMiller45 HYPERLINK l _bookmark33 Dell Technologies Inc. acquires EMC Corp46 HYPERLINK l _bookmark34 Mylan NV acquires Me

20、da AB47 HYPERLINK l _bookmark35 Teva acquires Allergan PLCs generic drug business48 HYPERLINK l _bookmark36 Southern Co acquires AGL resources49 HYPERLINK l _bookmark37 Charter acquires Time Warner Cable50 HYPERLINK l _bookmark38 Newell Rubbermaid and Jarden Corporation Merger51 HYPERLINK l _bookmar

21、k39 Avago acquires Broadcom52 HYPERLINK l _bookmark40 Intel Corp acquires Altera Corp53 HYPERLINK l _bookmark41 Lockheed Martin acquires Sikorsky Aircraft Corporation54 HYPERLINK l _bookmark42 CVS Health Corp acquires Omnicare Inc55 HYPERLINK l _bookmark43 UnitedHealth Group acquires Catamaran Corp5

22、6 HYPERLINK l _bookmark44 HJ Heinz Corp merges with Kraft Foods Group Inc57 HYPERLINK l _bookmark45 Siemens acquires Dresser-Rand Group58 HYPERLINK l _bookmark46 AbbVie Inc acquires Pharmacyclics Inc59 HYPERLINK l _bookmark47 Becton Dickinson acquires CareFusion Corp60 HYPERLINK l _bookmark48 Actavi

23、s PLC acquires Allergan Inc61 HYPERLINK l _bookmark49 Bayer acquires Merck consumer care unit62Summary and conclusions: deleveraging progress continues with some misses, newer deals have less leverageThis note is an update to our first M&A note published in September 2018. As a reminder, we previous

24、ly analyzed 32 large M&A transactions from 2015 onwards, calculating the jump in leverage which happened with the deals, and then the pace of deleveraging in subsequent quarters. The key takeaways from the last report were that leverage increased by 1.6x on average for the deals in our study. Six qu

25、arters later it had come down by 0.4x (down by 25%). This slow pace of deleveraging is part of the broader BBB risk discussion. Many of these companies were downgraded upon their mergers but still post-merger credit ratings were generous as they took into account the companys deleveraging plans. To

26、the extent this deleveraging is not meeting expectations ratings downgrade risks rise.In this update, we have increased the number of transactions analyzed to 45 from 32. The larger size of the database allows us to breakout out the trends over time. We have also extended the post deal tracking of d

27、eleveraging to eight quarters from six. The first conclusion is that the jump in leverage including newer deals remains at +1.4x. The post deal decline in leverage averages -0.2x four quarters out,-0.4x six quarters later and -0.5x eight quarters later. The deals in 2016 saw an average jump in lever

28、age of 1.7x, those in 2017 of 1.4x and in 2018 1.1x, so the damage to credit metrics from M&A has been trending down, which is a positive trend.3.8xGross Leverage3.7x3.6x3.6x3.5x3.4x+1.4x3.4x3.3x3.3x2.4xExhibit 1: Leverage rose by 1.4x, on average, for the 45 transactions since 2015 which we review

29、in this note. It then declined by 0.5x over the subsequent 2 years4.0 x3.5x3.0 x2.5x2.0 x1.5x1.0 x0.5x0.0 xPre-deal Post-deal +1Q+2Q+3Q+4Q+5Q+6Q+7Q+8QSource: J.P. Morgan, Capital IQOver the past four years, the size of transactions has increased while the resultant increase in leverage has declined.

30、 Both of these trends reflect market forces and lessons from earlier transactions. There has been increasing market focus on the level of leverage in some transactions, especially given the subsequent weakness in post-deal EBITDA trends in a few deals. As a consequence the market has become less tol

31、erant of transactions which increase leverage significantly, and this is reflected in a downward trend in the amount by which leverage increases in recent deals. The increase in the size of transactions is a reflection of the strong market for bonds overall, and the ability of benchmark HG bond issu

32、ers to tap the markets for significant debt when they have a transformational M&A opportunity.Exhibit 2: The increase in leverage in recent M&A deals has been declining5.0 x4.5xPre-Deal LeveragePost-Deal Leverage+1.7x3.9x3.3x+1.4x+1.4x2.8x2.4x+1.1x2.5x3.5x1.8x4.0 x3.0 x2.0 x1.0 x0.0 x201520162017201

33、8Source: J.P. Morgan, Capital IQOf the 27 M&A transactions reviewed in this report where it is not too soon to draw a conclusion, our analysts conclude that 12 companies have succeeded in achieving their post merger financial target, 6 are on track, 2 are behind plan, and 7 have not succeeded. Thats

34、 44% success, 22% on track, 7% behind plan, and 26% not succeeded. This is an assessment of whether the stated deleveraging or other financial target(s) that was stated at the time of each transaction was met. As discussed below, this progress has occurred in the context of a strong economic backdro

35、p and favorable financial markets for borrowing. There has been one obvious M&A failure with Teva, where post a large merger the company was downgraded to HY and the bonds which were issued to fund the transaction currently trade about 150bp wider than at issuance. See the back section of this repor

36、t for a discussion of each deal.Results from a bond investors perspective: Buying the bonds issued to fund the M&A deals in our sample has been a good investment. The median outperformance of these bonds versus the JULI has been 23bp one year later and 26bp two years later. The deal weighted average

37、 has been 30bp and 25bp of outperformance over the same period. There are two outlier results: Investors in Tevas M&A bonds fared poorly with the 10yr bond 161bp of underperformance eight quarters post the deal. In contrast, investors in Dells M&A bonds did well with 168bp of outperformance. Excludi

38、ng these outliers, the average outperformance has been 25bp over the same period. This calculation is based on the benchmark 10yr bond issued for the M&A funding, compared to the JULI 10yr spread performance. Note that the outperformance average is comparing different time periods for each deal.5.2x

39、Pre-deal LeveragePost-deal Leverage4.0 x3.8x3.3x3.4x2.6x2.3x2.7x2.1x2.4xExhibit 3: Leverage increased the most in Consumer Non-Cyclical transactions, and the least in TMT deals6.0 x5.0 x4.0 x3.0 x2.0 x1.0 x0.0 xTMTOtherHealthcare/Pharma Consumer NoncyclicOverallSource: J.P. Morgan, Capital IQExhibit

40、 4: Deleveraging post deal has occurred in all sectors, on average, but there were different starting points5.5x5.0 x4.5x4.0 x3.5x3.0 x2.5x2.0 xConsumer Noncyclicals Healthcare/Pharma OtherTMTOverallPre-deal Post-deal+1Q+2Q+3Q+4Q+5Q+6Q+7Q+8QSource: J.P. Morgan, Capital IQExhibit 5: Although Consumer

41、 Noncylicals delivered the most on an absolute basis, this sector has reported the largest jump in leverage in its deals0.0 x-0.2x-0.4x-0.6x-0.8x-1.0 xConsumer Noncyclicals Healthcare/Pharma OtherTMTOverallTMT, -0.3xHealthcare/Pharma,-0.4xOverall, -0.5x Other, -0.5xConsumer Noncyclicals, -0.9xPost-d

42、eal +1Q+2Q+3Q+4Q+5Q+6Q+7Q+8QSource: J.P. Morgan, Capital IQExhibit 6: M&A performance by sectorPre- DealGross leverage Post deal+8QRating change since pre-deal* Post deal+8QOutperformance of 10Y bond issued forM&A deals 8 quarters after the closeHealthcare& Pharma (ex Teva) Consumer Noncyclicals2.1x

43、2.7x3.9x5.2x3.3x4.2x0.1 lower1.4 lower0.3 lower1.4 lower46bp (ex-Teva)1bpTMT2.6x3.3x3.0 x0.2 higher0.1 higher57bp / 10bp (ex-Dell)Other2.3x3.4x2.9x0.6 lower0.7 lower22bpTotal2.4x3.8x3.3x0.4 lower0.7 lower25bp / 25bp (ex-Dell & Teva)Note: The rating changes in the table above only reflect the deals w

44、hich have eight quarters of post-deal close leverage data, whereas the change in gross leverage figures reflect the debt weighted average for all deals which have data available at the timeSource: J.P. MorganExhibit 7: Buying the bonds issued to fund the M&A deals in our sample has been a very good

45、investment (Larger number indicates outperformance of M&A 10yr bond vs JULI 10yr)Spread outperformance, bp All Sectors4035302520151050Issue Date+6 months+12 months+18 months+24 monthsSource: J.P. MorganWhy M&A mattersThe US High Grade corporate bond market has grown substantially over the past few y

46、ears, helping companies fund their investment and growth needs. A key use of funding from the market recently has been for Mergers and Acquisitions (M&A). From 2015 -2018 M&A funding represented 29% of the bond issuance for non-Financial companies. $833bn was raised for M&A by these issuers over the

47、 past 4 years. For this reason, understanding the success of these transactions is important for HG bond investors, and to better understand the risks in the market more broadly. Defining what the success of a transaction means is not straightforward, however, and is what we aim to do from a credit

48、investors perspective, in this note.Exhibit 8: M&A related bond issuance has accounted for 29% of all non-Financial HG bond supply since 2015$bn733715765M&A issuanceOther Non-Financial issuance6994745046214802582111442191,00080060040020002015201620172018Source: J.P. Morgan, DealogicIn most cases in

49、an M&A transaction a company increases its leverage and then aims to bring this leverage down by capturing revenue and/or cost synergies.M&A is an inherently bullish transaction a company is (usually) taking on more debt with a view that the combination of the market opportunity and their leadership

50、 will allow them to capture the benefits of the larger scale. At the time of most transactions, the company will announce an estimate of the synergies they will capture. They usually provide a future leverage target (or other financial metrics) that they are aiming to achieve at some (sometimes) spe

51、cified time period in the future. These targets, where they exist, are listed in Exhibit 17 below, and discussed on each of the transaction detail pages at the back of this publication.Exhibit 9: The leverage of US HG non-Financial companies has risen sharply over the past few years, in part due to

52、significant M&AGross LeverageGross Leverage ex Metals/Mining, Energy3.1x2.7x2.3x1.9x1Q101Q111Q121Q131Q141Q151Q161Q171Q18Source: J.P. Morgan, Capital I.Q.The rating agencies play an important role in this dynamicIn many M&A transactions ratings are downgraded due to the increase in leverage and the i

53、ncreased uncertainty that comes with an untested integration between two previously distinct entities. As part of their review process the rating agencies often are assessing the announced integration/deleveraging plans of the combined entity. To the extent they believe the plan to be credible their

54、 rating will reflect this. In such cases, the rating today typically will be higher than it would be were the current metrics alone being incorporated.This has raised concerns in the investment community that the ratings post some M&A transactions may be too high. Companies, in some cases, are start

55、ing out with leverage metrics well above those typical for the assigned rating, as the rating agencies are giving them credit for a plan to improve their leverage and/or other financial metrics going forward. If the deleveraging or other financial targets which were promised are not achieved, rating

56、s downgrades would be expected in many cases.Exhibit 10: Ratings were downgraded by an average of 0.4 notches for the M&A deals in our sample. Two years later the average rating was lower by another 0.2 notchesAverage Rating0.4 Notches lower0.2 Notches lowerAA-BBB+BBBPre-DealPost-Deal+8QNote: The ra

57、ting changes in the chart above only reflect the deals which have eight quarters of post-deal close leverage data Source: J.P. Morgan, Moodys, S&P and FitchThe relationship between the change in leverage and the change in rating has been fairly consistent over time. For the M&A deals in this report

58、there has been a fairly consistent correlation between the amount of leverage added and the extent of rating downgrade which occurred. Approximately a 1.5x in increase in leverage has led to a 1 rating notch downgrade (i.e. BBB+ to BBB flat), on average. Thisrelationship has held across the four yea

59、rs of our analysis and also across the size of debt issued for the deals. The chart below shows this relationship. There is a different color for each year, and deals with more debt issued are shown with larger dot sizes. For the black dots (2018 deals) these tend more to the left (i.e. less leverag

60、e than prior years) and also they are larger dots, as they are larger deals. They do fall pretty evenly on both sides of the regression line. This shows that there has not been an obvious shift by the rating agencies either positive or negative, on their model as the relationship between leverage ch