Login
Cross-border M&A deals decrease year-on-year
There has been a decline of over one-quarter in the value of cross-boarder deals in 2019, with investors looking closer at domestic markets, says one global firm.
Jerome Doraisamy
According to Allen & Overy’s “M&A Insights Q4 2019” report, released last week, there has been a decline of 27 per cent in the value of cross-border deals in 2019 compared with 2018, together with a “dominance of large domestic transactions” globally with the top 10 deals in the year all within one country.
To continue reading the rest of this article, please log in.
Create free account to get unlimited news articles and more!
“Overall, global trends show that deal values and volumes are down by around 7 per cent and 10 per cent respectively but despite this, 2019 is still set to be the third-strongest year to date in terms of value and the fourth strongest in transaction volumes for a decade,” the firm said in a statement.
A&O global co-head of M&A Richard Browne said: “The fact that the market is still so strong when anxieties are rising around macro-economic issues is proof that many investors are keeping their nerve.”
“Next year may well test this resolve more sharply but investors will, we believe, continue to be active, absent significant political or economic shocks.”
The strength of the global market is “underpinned by a resurgence in strategic megadeals”, the firm noted, which it says are once again powering the market. Deals over US$5 billion account for 43 per cent of the value of worldwide M&A, it continued, and said that deals worth more than US$10 billion make up 33 per cent of total value.
The slowdown in global dealmaking is cross-sector, according to A&O.
Nearly all sectors have declined by value compared to 2018, with TMT the starkest example at 15 per cent down the previous year. The exceptions are the financial services sector, which has seen an increase of 9 per cent and life sciences and healthcare, which has seen a 19 per cent increase in deal value in 2019 compared to 2018, giving the sector global deal value of US$479 billion.
A&O co-head of life sciences Laetitia Bénard posited: “In some respects it’s surprising for the life sciences and healthcare sector to continue to grow so strongly at a time of heightened regulatory and market uncertainty”.
“What we are seeing is the result of pressures unique to the sector forcing players to look for growth through acquisitions and collaborations.”
Looking at geographical data, despite a general decline in activity, the US continues to drive global activity, the firm continued, accounting for 48 per cent of global transactions by value at US$1.7 trillion.
“While domestic deals dominate, the US also remains both the biggest target market and acquirer in cross-border deals,” Ms Bénard said.
M&A head of US Eric Shube commented: “What we are seeing in the strength of the M&A market is that corporates and other investors have concluded that despite the advanced age of the current cycle we are not about to descend into a recession, rather the current cycle still has legs”.
