EDITOR'S NOTE: This article was originally published by The Deal, a sister publication of TheStreet that offers sophisticated insight and analysis on all types of deals, from inception to integration. Click here for a free trial.
A flurry of late-year M&A activity in 2015 put it in the record books as the busiest ever for M&A, surpassing 2007's total of $4.296 trillion in transaction value by hundreds of billions of dollars. A combination of growing corporate confidence despite difficulties finding organic growth pushed executives towards dealmaking, fueled by an abundance of cheap debt and flexible financing options.
But not all deals are created equal, and a large number of them fall short of expectations. With the benefit of a few quarters of hindsight, The Deal has selected 18 buyers as the Most Admired Corporate Dealmakers of 2015, broken down across multiple industries and a range of price points.
The blue-chip laden list of winners includes Lockheed Martin (LMT) , Home Depot (HD) , Verizon Communications (VZ) , Boston Scientific (BSX) , General Growth Properties (GGP) , Hormel Foods (HRL) , Coach (COH) , Honeywell International (HON) , Under Armour (UA) and Post Holdings (POST) . The targets are as diverse as the winners, ranging from prime Fifth Avenue real estate to promising medical treatments, and from consumer standbys like AOL to up and comers like salsa makers and fitness apps.
The Deal revised its criteria for selection this year, with the pool of nominees for Most Admired Corporate Dealmaker Awards selected via a team of journalists who considered factors including stock price appreciation and then separating nominees into various industrial sectors and into three transaction size categories. A total of 18 winners were selected via a closed panel of senior dealmaking practitioners who considered how the deal team excelled in overall M&A strategy, including choice of targets, deal execution and impact on stock performance.
Winners will be recognized at an awards luncheon during The Deal's annual forecasting conference, The Deal Economy Event: Predictions & Perspectives for 2017, on Dec. 1, 2016, in New York City.
It's worth noting that some of the biggest deals of 2015 -- transactions including Pfizer's (PFE) planned $160 billion purchase of Allergan (AGN) , Anheuser-Busch InBev's (BUD) $108 billion acquisition of SABMiller (SBMRY) and Dell's $67 billion deal for EMC -- were not up for consideration because they either did not close by year's end or were terminated prior to close.
While the award is for most "admired" dealmaker, Lockheed in its $9 billion purchase of Sikorsky Aircraft from United Technologies (UTX) could have just as easily been tabbed as most "audacious" dealmaker. While the defense sector is a constant source of small- to mid-sized transactions and the occasional large deal involving government services or IT assets, hardware platforms have largely not changed hands in recent decades due to Pentagon fears that the industry was becoming too concentrated.
Lockheed didn't have a rival helicopter offering, but it was a supplier to Sikorsky and other manufacturers and therefore triggered vertical integration concerns. The company from the time the deal was announced insisted it would pass regulatory scrutiny and ultimately got the go-ahead, but in the wake of the deal the Pentagon criticized the Department of Justice and called on Congress to draft legislation giving the Department of Defense a greater voice in defense deals, proving that Lockheed had indeed kicked the hornet's nest.
The deal was part of a broader reshaping at Lockheed, which during the same period divested of its government IT unit and reworked other units. The company in recent quarters has ridden a wave of defense spending including a doubling of revenue in its mission system business thanks largely to the Sikorsky deal, with its stock up 18% since the day the deal was announced.
Home improvement retailer Home Depot has long tried to juggle its business selling to consumers with its business selling to contractors, at one point building and then spinning off HD Supply Holdings (HDS) . Its latest effort to build its offering to professional contractors included its $1.625 billion purchase of Interline Brands.
Jacksonville, Fla.-based Interline is a distributor and vendor of maintenance and repair supplies, boasting a portfolio of more than 160,000 products including janitorial and sanitation, plumbing, HVAC, security and remodeling gear. The company, which was owned by Goldman Sachs Capital Partners, P2 Capital Partners and management, generated more than $2 billion in annual sales from a distribution network of more than 90 locations spread across North America.
Home Depot CEO Craig Menear at the time said that "addressing the needs of our pro customers is a top priority," putting long-time company veteran Bill Lennie in charge of a newly created position overseeing Interline and the company's other professional, maintenance and installation units.
Housing has been on the upswing of late, and with it Home Depot shares have enjoyed a good run. The company's stock is up more than 15% from the day the deal was announced.
While AOL may be synonymous with the early days of dial-up Internet, Verizon purchased the company for $4.4 billion to boost its media technology prowess as it targets Millennials through mobile content.
AOL CEO Tim Armstrong had retooled the company as an ad tech, video and content outfit, and since the acquisition the unit has become the hub for Verizon's mobile video and advertising efforts. AOL's evolution occurred through deals like the $405 million purchase of video ad outfit Adap.tv in 2013. The portfolio includes TechCrunch, The Huffington Post and a mobile advertising network.
The AOL acquisition fits with Verizon's purchase of Intel's (INTC) cloud TV business, content delivery company EdgeCast Networks and video technology developer Uplynk. Verizon has also invested in AwesomenessTV, an online media partnership with DreamWorks Animation and Hearst that targets young audiences.
AOL and the other properties drive Verizon's Go90 ad-supported video streaming app. The telecom has hired NBCUniversal executive Chip Canter as GM of digital entertainment and Go90, and YouTube veteran Ivana Kirkbride as chief content officer for the video streaming app.
Content on Go90 ranges from NBA games to AwesomenessTV's Guidance, a teen-focused drama based on a school guidance counselor.
The next step for Verizon and Armstrong is to acquire Yahoo!'s (YHOO) Internet operations for nearly $5 billion. The transaction, which has yet to close, has been complicated by the hack of Yahoo!'s user accounts. With Yahoo! in the fold, Armstrong aims to boost the online user count of the collective companies from 1 billion to 2 billion by 2020.
Boston Scientific has remained a thoughtful and disciplined buyer in light of large-scale industry consolidation, tending go after to small- to moderate- sized transactions that it can more easily fold into its infrastructure and leverage cross-selling opportunities. Sticking to its knitting is a strategy that has gone well for Boston, as the Marlborough, Mass.-based medical device maker essentially touches the entire gastrointestinal treatment market.
Having steered away from megadeals ever since its $26 billion purchase over a decade ago of Guidant, Boston's last billion-dollar-plus deal was its $1.6 billion acquisition of the urology portfolio of Endo International (ENDP) . The deal for the men's health and prostate health businesses of American Medical Systems was completed in August 2015, and combined with Boston's existing urology and women's health business, close to doubled the segment's revenues to almost $1 billion.
Since closing the AMS transaction, Boston has continued to strike tuck-in deals, most recently buying EndoChoice Holdings for $210 million to grow its endoscopy franchise. In July it added Cosman Medical for an undisclosed price, while other 2015 deals include its $70 million purchase of Celonova Biosciences and $75 million deal for Xlumena.
In contrast to Boston peer Medtronic (MDT) , which completed its $49.9 billion takeout of rival Covidien in January 2015 and Abbott Laboratories (ABT) , which is working to complete two pending deals -- St. Jude Medical (STJ) and Alere (ALR) -- worth almost $40 billion combined, Boston is unlikely to bet on large debt-financed deals anytime soon.
Shares of Boston Scientific have climbed nearly 30% since the deal was announced.
The once bankrupt General Growth, a REIT focused on shopping malls, forked over $1.775 billion to buy New York's Crown Building at 730 Fifth Avenue from Lexington Building, an affiliate of the Winter and Spitzer families.
The building, whose tenants include KKR (KKR) and Apollo Global Management (APO) , fetched an office building record of $4,490 per square foot. Another tenant, luxury retailer Bulgari, signed a 15-year lease for a reported $5,000 per square foot. The Winter and Spitzer families -- the latter is headed by former New York Governor Eliot Spitzer -- bought the Crown Building, which once was the home of the Museum of Modern Art, from the Philippine government for about $94 million in 1991.
Following General Growth Properties' purchase, developers Michael Shvo and Vladislav Doronin purchased the building's 290,000 non-retail square feet, from its fourth to 24th floors, with plans to turn their $500 million purchase into luxury condos and a hotel. Doronin, of Russia, owns hotel developer Amanresorts International, while the Israeli-American Shvo was charged with tax evasion in September.
It's a remarkable turnaround for GGP, which went bankrupt in 2010, emerged with backing from Brookfield Asset Management affiliate REP Investments and fought off an activist campaign from Bill Ackman's Pershing Square Capital Management. But shares of General Growth have underperformed of late, down 12.9% from when the deal was announced.
Prem Watsa's Fairfax Financial Holdings spent £1.22 billion (at the time $1.88 billion) on Lloyd's of London insurer Brit less than a year after it went public.
The deal provided much needed diversification to Toronto-based insurance and reinsurance business Fairfax, which now operates Brit on a decentralized basis. The acquisition price was worth 1.73 times Brit's tangible book value. RBC Capital Markets advised Fairfax, while JPMorgan Cazenove advised Brit.
Fairfax has been quite the dealmaker since its Brit acquisition, announcing that it bought an 80% stake in Eurolife ERB Insurance Group Holdings from Eurobank Ergasias for $343.82 million (€316 million) in cash in December 2015.
Following this deal, the company acquired American Insurance Group's (AIG) insurance operations in Argentina, Chile, Colombia, Uruguay, Venezuela, and Turkey for $240 million in cash in October. Fairfax shares are up 5% since the date the Brit deal was announced.
St. Louis-based Post Holdings sought the comfort of "MOM" as part of its expansion plan, agreeing in January 2015 to acquire Malt-O-Meal parent MOM Brands for $1.15 billion to grow its share of the ready-to-eat cereal business.
Minneapolis-based MOM is the maker of branded and private-label cereal, offering value versions of more famous competitors for sale in grocery stores and big-box locations. Some of those more famous cereals were Post brands, with Post CEO Rob Vitale remarking at the time of the deal "after a century of spirited rivalry between MOM Brands and Post, we now look forward to combining our strengths."
It was part of a broader growth push by Post, which also in that period acquired peanut butter maker American Blanching for $130 million, MFI Holding for $2.45 billion and PowerBar from Nestle for an undisclosed sum. Post has been seeking to diversify its portfolio in reaction to changing consumer trends including a preference for ready-to-eat foods and favoring price over brands.
The strategy seems to be working, with Post shares up more than 65% since the MOM deal was announced.
Dover (DOV) was seeking out growth and improved margins and diversification away from its energy business when it committed $520 million in October 2015 to acquire JK and Gala Industries for a combined $520 million. Gala, of Eagle Rock, Va., is a maker of underwater pelletizers and related equipment for the plastics and polymers industry. Dover bought the company to complement its 2012 purchase of Switzerland's Maag Pump Systems to create a one-stop-shop for plastics firms.
JK, an Italy-based textile printing ink maker that Dover said had an operating margin of near 45%, would be by far the most profitable business the $5 billion-sales buyer has ever purchased. The Downers Grove, Ill.-based diversified manufacturer said that Gala's margins were closer to 12%, about where Maag was when it was purchased, but the company believes there are opportunities to do better as the two businesses are combined.
So far so good. Though Dover in October lowered its profit and sales outlook for the year due to weak oil and gas spending and global uncertainty, its shares have weathered the issues better than some and are up more than 15% since the deal was announced.
Zoetis (ZTS) in November went fishing for Norwegian aquatic health specialist Pharmaq Holding, forking out $765 million for what represented the Pfizer spinoff's largest deal to date.
In so doing, the Florham Park, N.J.-based provider of therapies for livestock and companion animals scored a notable share of the global fish consumption market, scaling up in a sector viewed as a having tremendous growth potential. At the same time, Pharmaq's diversification into aquaculture reduced Zoetis's dependency on the cattle segment. According to a Credit Suisse report in February, the aquaculture market was worth $400 million in 2014 and is growing at a healthy 7% to 8% annually.
Outside of the farmed fish sector, Zoetis has also showed an appetite for animal point-of-care. The company this year spent $80 million for Scandinavian Micro Biodevices, a maker of devices for veterinary diagnostic services. It first entered the diagnostics tests market in 2010, when, then known as Pfizer Animal Health, it bought Synbiotics.
Shares of Zoetis are up 9.6% from the day the deal was announced.
Hormel, the consumer brands company behind products such as Spam and Skippy, said in May 2015 it would buy Applegate Farms, a maker of organic and natural meat products, for $775 million. It marked Hormel's largest acquisition ever, outpacing the $700 million price tag it paid for Skippy in January 2013.
Financial sponsor Swander Pace Capital, which was selling the asset, had taken a minority stake in Applegate in 2009. Applegate makes deli meats, hot dogs, bacon, sausage and other meat products. The portfolio of meat products, though, wasn't regarded as an overlap with Hormel's existing meat products lineup.
Applegate's pursuit of organic and natural ingredients -- it bills itself as offering products that have everything you want but nothing you don't -- helped move the processing giant Hormel into what management described at the time as a "holistic product area."
The transaction was expected to be immediately accretive to earnings, adding 7 to 8 cents a share in earnings per share. The stock, currently trading at $36 a share, had been trading at $28, adjusting for a February 2016 2-for-1 split, giving Hormel a 28% bump since the acquisition of Applegate Farms.
In January of last year high-end handbag maker Coach (COH) struck a deal to purchase luxury shoemaker Stuart Weitzman for $574 million. Consider it a do-or-die proposition.
The acquisition came amid Coach's effort to revamp its image during a period of declining sales for luxury products across the board. In fact, sales at Coach in the most-recent quarter ahead of the acquisition had declined 24%.
The Coach sales effort had been hurt by its exposure to the declines in the department store retail distribution chain, where its department store partners were pursuing increasing promotional activity, including substantial discounts, in order to drive traffic. Shares of Coach had fallen 33% in 2014.
The Stuart Weitzman brand had recorded $300 million in same-store sales in the 12-month period prior to the acquisition. Coach had decided to trim its department store retail partners by 25%.
Microchip Technology's (MCHP) $839 million purchase of Micrel plays into two prominent themes in the tech sector: semiconductor consolidation and the role of activist shareholders in spurring sales.
San Jose chipmaker Micrel launched a strategic review in January 2015. By May, Microchip had agreed to buy the company for $839 million, or $744 million net of the cash on Micrel's books.
Microchip CEO Steve Sanghi touted Micrel's presence in industrial, automotive and communications markets.
While the deal expanded Microchip's presence in strategic industries, the buyer has also taken costs out of the business. Microchip said it would cut $26 million in fabrication costs by shuttering a Micrel facility, for instance. CFO Eric Bjornholt told investors in June that Micrel's operating margins are on track to widen markedly from 3.6% at the time of the acquisition to more than 30%.
Cathay General Bancorp (CATY) , the California-based bank that caters to Chinese and Vietnamese individuals and businesses across the U.S., found success when it reached across the country in an effort to serve its target clientele in additional markets.
Cathay announced on Jan. 21, 2015, that it acquired Asia Bancshares, which operates Asia Bank and has branches in New York and Maryland. Kafafian Group advised Asia Bancshares on the deal.
The deal significantly boosted Cathay's presence in New York City and Washington, D.C. The company's bicoastal presence is a rarity in the regional banking industry, but given Cathay's specialized clientele, it makes sense, analysts say. Shares of the bank are up more than 20% since the deal.
In June 2015, Campbell Soup (CPB) , the maker of its eponymous canned soups and snack maker Pepperidge Farm, said it would buy Garden Fresh Gourmet for $231 million, a Michigan-based maker of salsa and hummus that recorded $100 million in annual sales, including the sales of the best-selling salsa in the retail sector.
Campbell Soup management had emphasized the importance of consumers' growing preference for foods they deem fresher, healthier or less processed than the traditional offerings of packaged foods that Campbell offered. Campbell initially jumped into packaged, fresh food in 2012 with the $1.55 billion acquisition of Bolthouse Farms, known for its baby carrots, refrigerated juices and high-end salad dressings.
Both Bolthouse and Garden Fresh are operated under what Campbell deemed its C-Fresh unit. Campbell Soup said it will be able to leverage Garden Fresh onto a national distribution platform, expanding its availability beyond its Midwestern roots.
Natural foods have grown at an approximately 5% clip year over year, while traditional processed brands have seen sales decline on a year-over-year basis. Meanwhile, Campbell Soup continued to pursue an agenda of cost cuts in its long-standing lines of business with the aim of boosting overall margins. The stock, trading at about $46 a share when the Garden Fresh acquisition was announced, is at $55 currently, giving the shares of 19% bump.
Honeywell over the years built a reputation as one of the industrials sector's most disciplined acquirers, passing on dozens of potential deals annually in order to keep its powder dry for when the right fit comes along. That patience positioned it well to move fast to acquire the solvents and inorganics business of Sigma-Aldrich that German drugmaker Merck was required to quickly sell to win approval for its $17 billion acquisition.
Honeywell bought the business, Sigma-Aldrich Laborchemikalien, for about $119 million, broadening the buyer's portfolio of high-purity solutions used in drug discovery, medical diagnostic testing and other lab applications. It is a business Honeywell was already involved in, but the purchase allowed Honeywell to serve a broader and more globally diverse customer base.
The buyer is likely best known for building controls and aerospace products, but Honeywell's performance materials business makes a range of chemicals including environmentally friendly refrigerants and the raw material that goes into body armor, nylon, computer chips and pharmaceutical packaging. In total the business generates nearly one-fifth of Honeywell's annual sales.
Shares of the company currently trade more than 14% above where they were when the deal was announced.
Under Amour in February 2015 sought to expand what it describes as its "connected fitness experience" by buying two digital fitness operations: MyFitness Pal, which makes a digital platform that tracks diet and workouts and Endomondo, a Danish startup that aims to serve as a virtual fitness coach.
Under Armour bought MyFitness Pal from financial sponsors Accel Partners and Kleiner, Perkins, Caufield & Byers, which invested $18 million in the enterprise in 2013. The purchase price was $425 million. The Endomondo startup sold for $85 million.
The acquisitions add to Under Armour's digital fitness platforms, which already included the site Map My Fitness. Under Armour had recently surpassed Adidas to become the second-largest sportswear maker, though it continues to broadly trail its larger rival Nike (NKE) .
However, the intensely competitive sportswear business has struggled recently. Shares of Under Armour, which were trading at a pre-split price of $75 at the time of the acquisition -- or $36 a share including the impact of an April 2016 2-for-1 split - are trading at just over $32 a share, down about 10%.
The $400 million purchase of Cervalis Holdings gave data center operator CyrusOne (CONE) a foothold in New York City and a new pool of financial services companies.
Cervalis owned data centers outside New York City, in Norwalk, Conn.; Stamford, Conn.; Wappingers Falls, N.Y.; and Totowa, N.J. The business generated $70 million in annual revenue by selling server space and related services to a clientele made up largely of hedge funds and financial services providers.
Despite the location of Cervalis and its data centers, CyrusOne did not pay a New York City markup. Burke & Quick Partners noted that the price of 10.5 times earnings before interest, taxes, depreciation and amortization for the prior quarter annualized compared to public data center operations of 16 times projected Ebitda. Wojtaszek put the valuation of the CME properties at 15 times Ebitda in an October call.
The market for data centers remains busy, Wojtaszek said during the October call, and CyrusOne will continue to shop.
For NeoGenomics Laboratories (NEO) , the financial and strategic impact of its $275 million cash-and-stock purchase of Clarient -- a company larger than it was prior to the deal -- is obvious.
Six months after the cancer diagnostic testing company completed its purchase of the unit of GE Healthcare, the Naples, Fla.-based company had more than doubled its revenue to $59.7 million, up 159% as opposed to a year earlier. The company also began to make a profit as it added lab capacity in the Southern California region, growing from what started out as just one clinical lab to a multi-facility operation with a nationwide presence. In the 10 months since closing the Clarient acquisition in December, NeoGenomics successfully migrated half of Clarient's accounts to its own system and anticipates 100% migration by year-end.
NeoGenomics holders have appreciated the effort, with shares up more than 45% since the day the deal was announced.
-- Chris Nolter, Sarah Pringle, Bob O'Brien, Laura Berman and Alicia McElhaney contributed to this report.