Global executives cooling on deals amid trade uncertainty
london — Executives around the world are cooling to the idea of mergers and acquisitions in the face of rising trade tensions, notably between the US and China, a leading adviser on international corporate deals said on Monday.
In its half-yearly assessment of corporate mergers and acquisitions, or M&A, EY found that only 46 per cent of executives are planning a takeover in the next 12 months. That’s down 10 percentage points from a year ago and marks the lowest level in four years.
“Geopolitical, trade and tariff uncertainties have finally caused some dealmakers to hit the pause button,” said Steve Krouskos, a global vice chair at EY. “Despite stronger-than-anticipated first-half earnings and the undeniable strategic imperative for deals, we can expect this year to finish with much weaker M&A than how it started.”
EY highlighted the dispute between the US and China and uncertainty over Britain’s looming exit from the European Union as key reasons behind the decline in executives’ interest in deals. The former has already led to an increase in tariffs, while Brexit could still yet, especially if Britain does not secure a deal with the EU over future relations ahead of next March’s departure.
Higher tariffs have the potential to weigh on global growth, especially if countries retaliate against each other in a vicious cycle.
In a separate report on Monday, ING Bank said it expects trade growth to almost halve in 2018, to 2.6 per cent, and to drop to 1.3 per cent in 2019, the lowest level since the trade collapse of 2009. It said rising protectionism is one key reason behind the slowdown.
This year has seen a number of mega deals including Comcast’s capture of British satellite television company Sky in a rare auction for around $40 billion and Disney’s agreement to buy Twenty-First Century Fox’s entertainment assets for $71 billion. German pharmaceutical firm Bayer closed its $63 billion acquisition of US seed and weed-killer maker Monsanto.
EY’s survey was based on responses from more than 2,600 executives across 45 countries.