Large cross-border mergers and acquisitions “almost disappeared” in the first-quarter of 2019, according to a new report.
In its latest analysis of global M&A (mergers and acquisitions), research firm Mergermarket found that only one “mega deal” – any deal worth more than $10 billion – was agreed between firms based in different countries.
Researchers found that in total, only nine “mega deals” had been struck in the first three month of this year, down from 14 in the first quarter of 2018. Of those nine, more than 70 percent were cases of U.S. corporates taking out competitors in their domestic market.
U.S. miner Newmont’s $12.8 billion acquisition of Canada’s Goldcorp was the only “mega deal” to arise from a cross-border transaction.
The report showed that the global value of deals made in the first-quarter of 2019 hit $801.5 billion – a 15 percent decrease from the same period in 2018. Meanwhile, the number of deals registered globally fell from more than 5,000 to just 3,558.
Cross-border M&A accounted for just 30 percent of global deals, compared to an average of around 40 percent between 2015 and 2018, the research showed. Outbound M&A from China saw a significant decline, reaching its lowest level since the second half of 2014.
However, the U.S. domestic market bucked the trend, with its M&A transaction value gaining almost a third year-on-year while the value of global deals fell by 15 percent. The total value of U.S. M&A in the first quarter reached $414.2 billion, accounting for 51 percent of global M&A value.
The most valuable deal to be completed in the U.S. was Bristol-Myers Squibb’s $89.5 billion acquisition of domestic rival Celgene Corporation.
Meanwhile, Europe’s deals were valued at $122.9 billion, marking a year-on-year decline of more than 20 percent. Mergermarket said economic uncertainty and rising protectionism led to Europe’s lowest quarterly value since the third-quarter of 2012.
The deal analyst attributed the overall global decline in mergers to several issues, including market volatility and economic headwinds. Geopolitical tensions — including Sino-U.S. trade tensions and uncertainty around Brexit — were also contributing to the slowdown in M&A, Mergermarket said.
Despite the downturn, Beranger Guille, global editorial analytics director at Mergermarket, said the data was no reason for pessimism.
“Vigorous private equity activity and a healthy domestic deal flow in the U.S. should give hope to dealmakers for the rest of 2019,” he said in a press release Tuesday.
His views support the stance of analysts at consulting firm A.T. Kearney, who said in a report this week that major retail and consumer companies would look to M&A to strengthen their portfolios ahead of an expected economic slowdown.
Philippe Houchois, equity research analyst at Jefferies, told CNBC’s “Squawk Box Europe” on Wednesday that he expected to see more deals being made in the autos sector as political resistance to M&A in the sector subsided.
Meanwhile, Philip Noblet, head of U.K. investment banking at Jefferies, told Reuters last week that British firms may look to M&A to protect themselves from negative Brexit consequences.
“The amount of pressure on these companies will accelerate in the coming months and for some the choice will be between domestic consolidation and restructuring,” he said.