The value of Orange County mergers and acquisitions slipped last year, but not as far as a first glance might suggest. The deals plummeted to $28.3 billion from $88 billion in 2015.
The lion’s share of the nearly $60 billion decline owes to a year-to-year comparison that includes a couple of deals involving Irvine-based outfits that were struck in 2015 and large enough to be considered outliers—the $37 billion acquisition of Broadcom Corp. by Singapore-based Avago Technologies—which has since taken the Broadcom Ltd. name—and the $20 billion purchase of SanDisk Corp. in Milpitas by Western Digital Corp. Take those out of the mix, and OC deals dipped by 9% from $31 billion in 2015, according to data provided by Los Angeles-based investment bank B. Riley & Co. The number of deals, both announced and closed, fell 13% to 290 from 335 a year before.
It’s the first dip since OC emerged from the recession five years ago. “For the first time in many years, the results are a little softer,” B. Riley Senior Managing Director Greg Presson, who is based in the firm’s Newport Beach office.
The Top 10
The Business Journal’s lists of the 10 largest deals involving Orange County-based buyers and sellers is based on dollar values. The lists include deals for companies, business divisions and intellectual properties, and exclude all real estate transactions and sales of healthcare facilities.
The lists include deals that have been announced but not yet closed, and reflect the Business Journal’s method of counting as two transactions any deals in which both the buyer and seller were OC companies.
Possible reasons for the lower activity include the Federal Reserve increasing interest rates that made debt deals more expensive; asset prices trending too high during the eighth year of the current recovery from the 2008 crash and dealmakers waiting to see how the winner of the U.S. presidency would affect assets, Presson said. A year earlier, deals were spread over many different sectors in Orange County because four keys to M&A were working: abundant capital, receptive markets, low interest rates and expanding stock markets.
“In 2014 and 2015, all boats rose,” Presson said. “In 2016, I noticed some separations. We’re seeing slowdowns where capital has gotten a lot more discerning.” There were four sectors in OC that accounted for most of the dealmaking last year: technology, with 80 deals, industrials (56), discretionary consumer products (55), and healthcare (44). “Those sectors had multiple transactions going on,” Presson said. “The capital flows to companies with higher growth rates and better prospects.” Deals in the financial sector fell 22% to 32, while those in consumer staples dropped 50% to 11. Other sectors with lower numbers of deals included materials (9), energy (1), and telecom services (1), with none in utilities. Private targets continued to be preferred, with 278 deals, compared with 323 deals in 2015. Public company deals were flat at 13.
Donald Trump may have a favorable impact on 2017 because he knows what is needed to reduce the regulations that have impeded the flow of capital to small and big businesses, Presson said. The stock market projects the future six to nine months out, which indicates it will be a good year for dealmaking, he said.
“It’s early, but there is an air of optimism because he’s a pro-business guy,” Presson said.
Among the more notable deals of 2016:
OC Sellers
• Irvine-based Ingram Micro Inc. sold for $7.3 billion to conglomerate Tianjin Tianhai Investment Company Ltd. in China.
• China-based conglomerate LeEco said it would buy Irvine-based Vizio Inc. for $2.1 billion in a deal that’s yet to close.
• Aliso Viejo-based QLogic Corp. was sold to Cavium Inc. for $1.3 billion.
• Irvine-based Too Faced Cosmetics LLC was sold for $1.5 billion to Estée Lauder Cos. Inc.
• Abbott Laboratories Inc. sold its Santa Ana-based Abbott Medical Optics to Johnson & Johnson for $4.3 billion.
OC Buyers
• San Clemente-based ICU Medical Inc. is buying Pfizer’s Infusion Systems Business, which was part of Hospira Inc., for $900 million.
• Irvine-based Pacific Premier Bancorp Inc. purchased Heritage Oaks Bancorp for $404 million.
• Experian’s North America unit, based in Costa Mesa, acquired CSIdentity Corp. for $360 million.
