Global merger and acquisition (M&A) volume at $842bn in Q2 2019, representing a 13 percent drop from the previous quarter. According to preliminary data from Refinitiv, this figure would have been significantly lower were it not for a flurry of US mega deals.
Around the world, M&A activity has suffered as a result of escalating geopolitical tensions. Dealmaking in Europe totalled $152bn – down 54 percent from a year ago – while Asia saw M&As decline by 49 percent to $132bn. By comparison, US dealmaking witnessed only a three percent drop, falling to $466bn.
Cross-border M&As have slowed as a result of global trade tensions, with buyers preferring to seek acquisitions in their domestic markets
The US’ relatively strong M&A performance can be attributed to a number of mega deals that took place in the past three months. These included the between United Technologies and the US defence contractor Raytheon, and US drugmaker AbbVie’s to acquire Allergan for $63bn.
However, these mega deals, and the level of sector consolidation they represent, have raised some concerns. The United Technologies-Raytheon merger, for example, would be the biggest in US defence sector history, but President Donald Trump has that the deal could ultimately harm competition.
Notably, cross-border M&As have slowed as a result of global trade tensions, with buyers preferring to seek acquisitions in their domestic markets instead. Reuters reported that it has been more than 400 days since a cross-border deal worth over $20bn was announced.
The slowdown in global M&A activity is predominantly a reflection of sinking confidence due to geopolitical risks. It’s possible, though, that US dealmakers have experienced a comparative confidence boost as a result of growing cash reserves and a more relaxed regulatory environment. However, regulators in the US should be careful to ensure that this trend of consolidation does not stifle competition at home.