Global M&A vol­ume flat­tens in third quar­ter

Viet Nam News - - MARKETS -

US chip maker Qual­comm Inc pulled its planned $44 bil­lion ac­qui­si­tion of NXP Semi­con­duc­tors NV in July af­ter China de­layed of­fer­ing an­titrust clear­ance, a move seen as re­tal­ia­tory to the trade tar­iffs an­nounced by the United States.

NEW YORK/LON­DON — Global merg­ers and ac­qui­si­tions dropped to US$783 bil­lion in the third quar­ter, down 35 per­cent from the prior quar­ter, as the es­ca­lat­ing trade dis­pute be­tween the United States and China cast a shadow on the fi­nan­cial and reg­u­la­tory prospects of some deals.

US chip maker Qual­comm Inc pulled its planned $44 bil­lion ac­qui­si­tion of NXP Semi­con­duc­tors NV 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 Corp’s $23 bil­lion ac­qui­si­tion of Rock­well Collins Inc.

“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 Inc’s global co-head of M&A.

The num­ber of global an­nounced deals hit its low­est level 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 deal­mak­ing reach a new record of $3.2 tril­lion.

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 per cent to $185.1 bil­lion, the Thom­son Reuters data showed.

Among the third quar­ter’s big­gest an­nounced deals were chip­maker Broad­com Inc’s $18 bil­lion ac­qui­si­tion of soft­ware maker CA Inc, and Dell Tech­nolo­gies Inc’s pro­posal to pay $21.7 bil­lion in cash and stock to buy back se­cu­ri­ties re­lated to its stake in soft­ware com­pany VMware Inc.

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 Inc pri­vate, valu­ing the com­pany at $72 bil­lion.

Musk had said he had held early talks about the buy­out with Saudi Ara­bia’s Pub­lic In­vest­ment Fund, a move that high­lighted the grow­ing im­por­tance in al­ter­na­tive pools of cap­i­tal around the world, from sov­er­eign wealth funds to pen­sion funds. Musk de­cided to scrap the plan and was sued on Thurs­day by the US Se­cu­ri­ties and Ex­change Com­mis­sion over his tweets.

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 bil­lion-plus deals,” Cris­terna said. “Next year we will see fewer trans­for­ma­tional moves but there will be a large amount of ac­tiv­ity in the $3 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.”

Deal­mak­ers said that reg­u­la­tory risk re­mains a con­cern across the globe.

“An­titrust re­views are more dif­fi­cult to pre­dict, “said Alexan­dra Soto, Lazard Ltd’s chief op­er­at­ing of­fi­cer of fi­nan­cial ad­vi­sory in Europe.

Deal­mak­ers also said they are pre­par­ing for an ac­qui­si­tion spree by Ja­panese com­pa­nies, fol­low­ing the coun­try’s big­gest-ever out­bound deal this year, Takeda Phar­ma­ceu­ti­cal’s 45.3 bil­lion pound agree­ment to buy Lon­don­listed drug­maker Shire Plc. “Many Ja­panese com­pa­nies have ac­cess to sub­stan­tial cap­i­tal and they are us­ing it to drive M&A growth out­side of Ja­pan,” Mor­gan Stan­ley’s head of Amer­i­cas M&A, Tom Miles. “We ex­pect Ja­panese com­pa­nies to con­tinue out­bound M&A at a strong pace.”

Tens of bil­lions of dol­lars in tar­iffs by the United States and China have not dented the rise of most stock mar­kets in the Western world, and deal­mak­ers said they did not see the eco­nomic cal­cu­lus chang­ing among cor­po­rate ac­quir­ers.

“In some sec­tors where it cre­ates clear uncer­tainty, com­pa­nies are fac­tor­ing it into their think­ing. We have not seen uncer­tainty around tar­iffs be a ma­jor im­ped­i­ment to M&A so far,” Mor­gan Stan­ley’s Miles added. — REUTERS

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