Trade tensions hit global M&As
new york/london — Global mergers and acquisitions dropped to $783 billion in the third quarter, down 35 per cent from the prior quarter, as the escalating trade dispute between the US and China cast a shadow on the financial and regulatory prospects of some deals.
US chip maker Qualcomm pulled its planned $44 billion acquisition of NXP Semiconductors in July after China delayed offering antitrust clearance, a move seen as retaliatory to the trade tariffs announced by the United States.
This has cast uncertainty on the prospects of other deals involving global companies that require Chinese regulatory approval, including aerospace supplier United Technologies’ $23 billion acquisition of Rockwell Collins. “We’ve got some clouds on the horizon, vis a vis a trade skirmish, or potentially a trade war with China. You have the potential for a hard Brexit and we’ve got rising rates,” said Mark Shafir, Citigroup’s global co-head of M&A.
The number of global announced deals hit its lowest since 2013, at about 9,135, and global deal volume was down 6 per cent compared with a year ago. To be sure, dealmaking activity has remained stronger than average and the first nine months of 2018 saw global M&A reach a new record of $3.2 trillion.
M&A activity in Europe has been particularly strong, with deals worth $962.5 billion so far this year, a 72 per cent increase compared with a year ago and the strongest period for European dealmaking since 2007.
US M&A, which rose 14 per cent year-over-year to $368.1 billion in the quarter, fared better than other regions. Announced deals in Europe fell 14 per cent to $151.4 billion, while M&A in Asia-Pacific was down 38 percent to $185.1 billion, the Thomson Reuters data showed.
Among the third quarter’s biggest announced deals were chipmaker Broadcom’s $18 billion acquisition of software maker CA, and Dell Technologies’ proposal to pay $21.7 billion in cash and stock to buy back securities related to its stake in software company VMware.
In August, dealmakers had been chasing potentially the largest buyout of all time, after billionaire Elon Musk tweeted that he had the funding secured to take electric car maker, Tesla Motors private, valuing the company at $72 billion.
Hernan Cristerna, co-head of global M&A at JPMorgan, said he believes companies will gradually shy away from mega deals but remain active in midsize ones, despite the uncertain environment
“Going forward it will be hard to sustain the number of $10 billionplus deals,” Cristerna said. “Next year we will see fewer transformational moves but there will be a large amount of activity in the $3 billion to $5 billion deal range because companies see the logic of doing M&A and are conscious of the difficulties and risks of going through a big transaction.” —