Mergers & Acquisitions

Global M&As dip in 2017 on geopolitical uncertainty and China losing steam

Transaction value slid 3.2 per cent to US$3.15t last year, says Mergermarket, with China outbound deals down 36.2 per cent

PUBLISHED : Friday, 05 January, 2018, 6:31am
UPDATED : Friday, 05 January, 2018, 6:31am

Global mergers and acquisitions (M&As) fell 3.2 per cent in value in 2017 on the year, as geopolitical uncertainty apparently took a toll on investments even though total deals hit the US$3 trillion mark for the fourth straight year, according to data from Mergermarket.

Total deal value reached US$3.15 trillion over 18,433 transactions in the past year, it said on Thursday.

The last month of 2017 – December – recorded five mega deals, including two of the year’s largest deals where Disney acquired Fox’s entertainment assets for US$68.4 billion and the US$67.8 billion tie-up between CVS and Aetna.

Cross-border activity was again a key component of global M&As last year despite the small decline in number and value of transactions.

“Deal makers are pursuing a strategy of spreading risk, over consolidating within home markets, despite the global geopolitical uncertainty,” said the Mergermarket report.

Seven of the top 10 largest deals announced in 2017 were cross-border in nature, with the biggest being British American Tobacco’s US$59 billion takeover of Reynolds American.

Contrary to the previous year, the value of China outbound deals took a 36.2 per cent tumble to US$127 billion in 2017, as Chinese buyers faced tightened scrutiny at home and abroad.

On Tuesday, a US government panel rejected a high-profile deal initiated by China’s Ant Financial to acquire money transfer company MoneyGram International Inc, citing national security concerns. Ant Financial is the financial arm of e-commerce company Alibaba Group, owner of the South China Morning Post.

“Deal value for outbound M&As led by Chinese companies dropped significantly, largely due to the tightened scrutiny and capital control imposed by the Chinese authority since late 2016. As the deal value still stays above the 2015 and 2014 levels, we believe the momentum for outbound M&As from China would remain strong for 2018,” said Yiqing Wang, China editor with Mergermarket.

Chinese outbound M&A activity set to cool this year after record 2016

The US remained the most targeted market for deals by value, accounting for 40.2 per cent share of last year’s total global value. That share however, was not only the smallest since 2012 when it accounted for 37.6 per cent, but also represented a drop from 45.5 per cent in 2016 and the second consecutive decline.

Europe though, enjoyed a second successive growth to 29.6 per cent in 2017, up from 25 per cent and 23.1 per cent in 2016 and 2015 respectively.

Asia-Pacific, excluding Japan, remained steady last year, taking up 21.4 per cent of the global M&As, with China accounting for the vast majority of the region’s activity, at 49.1 per cent by value but a drop from 56.4 per cent for the previous year.

The technology sector hit its highest annual deal count on Mergermarket record (since 2001), with up to 2,569 transactions, as investors looked towards the latest developments in the industry, such as internet of things, autonomous vehicles and blockchain technology.