M&A 2019 Annual Review

In 2020, private equity firms will be armed with a record level of cash, as private equity firms at the end of 2019 held almost $1.5 trillion in unspent capital (or “dry powder”). 17 Combined with the current debt market, this provides massive investment potential. The biggest challenges in 2020 will be the geopolitical and macroeconomic factors affecting the overall M&A market described above, including potential economic downturns, the 2020 U.S. elections (in which some candidates have proposed legislation aimed directly at the private equity industry), and the U.S.-China trade dispute. Private equity funds must also continue to grapple with the enhanced competitiveness of the middle market, with the field of investors expanding to include sovereign wealth funds, venture capital firms, family offices and independent sponsors capable of writing bigger checks and pursuing direct control investments more often than ever before. Nevertheless, we expect private equity sponsors to remain active and to continue to look for opportunities to deploy their record-breaking capital in creative ways. This activity should continue, and build upon, trends seen in 2019, including an increased focus on portfolio company “add-on” transactions, “roll-up” strategies designed to create market-leading participants rather than acquiring existing, mature participants, and continued expansion of a sponsor’s typical investment scope (with respect to both sector and geographic focus). Sponsors are also expected to engage in more opportunistic pursuit of exit transactions (particularly if concerns of a broader economic slowdown become more pronounced). Private equity firms announced $450 billion of deals through December 26. Source: Data compiled by Bloomberg Note: Deal value is through Dec. 26 of each year; it includes majority/minority purchases, takeovers and buyouts by PE and VC firms 1. Refinitiv. 2. Refinitiv. 3. Refinitiv. 4. For more information on Akorn , see our prior client alert, https://www. mofo.com/resources/insights/181210- delaware-material-adverse-effect.html. 5. Lazard, 2019 Review of Shareholder Activism. 6. https://www.sec.gov/rules/ interp/2019/34-86721.pdf. 7. https://www.sec.gov/rules/ proposed/2019/34-87457.pdf. 8. https://s3.amazonaws.com/public- inspection.federalregister.gov/2020- 00188.pdf; https://s3.amazonaws. com/public-inspection.federalregister. gov/2020-00187.pdf. 9. For more information see our series of client alerts on the proposed and final rules, Part 1 Key Takeaways https:// www.mofo.com/resources/ publications/190924-foreign- investment-2020-modernized-cfius- regulations.html; Part 2 Real Estate Investments https://www.mofo.com/ resources/publications/191001-foreign- investment-2020-part-2.html; Part 3 Technology, Infrastructure, Personal Data https://www.mofo.com/resources/ publications/191015-foreign- investment-2020.html; Part 4 Who’s In, Who’s Out, and Why It Matters https:// www.mofo.com/resources/ insights/191121-foreign- investment-2020.html; Part 5 Final CFIUS Rules Announced (forthcoming on Morrison & Foerster’s National Security Practice webpage: https://www.mofo. com/capabilities/national-security. html#overview) . 10. https://www.federalregister.gov/ documents/2018/11/19/2018-25221/ review-of-controls-for-certain-emerging- technologies. 11. For more information see our client alerts, https://www.mofo.com/ resources/insights/190516-chinese- telecom-companies-under-fire.html and https://www.mofo.com/resources/ insights/191009-commerce-adds-28- chinese-organizations-bis-entity-list. html. 12. For more information see our client alert, https://www.mofo.com/resources/ insights/190809-new-rule-ndaa- prohibition.html. A broader prohibition that prohibits government agencies from entering contracts with entities that use covered equipment, services, or technology will become effective August 13, 2020, subject to forthcoming regulations. 13. https://www.govinfo.gov/content/pkg/ FR-2019-11-27/pdf/2019-25554.pdf. 14. Mergermarket Asia Pacific Trend Summary, Q1-Q3 2019. 15. Refinitiv. 16. https://ec.europa.eu/competition/ publications/reports/kd0419345enn.pdf. 17. Private Equity is Starting 2020 with More Cash Than Ever Before, Bloomberg LLP (Jan. 1, 2020). 8 2007 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’2019 $600B 400 200 0