Protectionism has crept from government departments to corporate boardrooms. The value of global deals struck in 2019 exceeded $3.8 trillion, but cross-border transactions were down by a quarter. Blame US President Donald Trump's sabre-rattling on trade, sluggish European growth, and heightened scepticism about Chinese takeovers.
It could have been a worse year for investment bankers. Though mergers and acquisitions did not keep pace with soaring global stock markets, deal activity was down just 3.5 percent on 2018, according to Refinitiv data. Still, transactions where the buyer and target are in different countries fell by 25 percent to $1.1 trillion. Admittedly 2018 was a particularly active year, with cross-border deals representing 39 percent of the total. But the 2019 proportion of 30 percent is the lowest for a decade.
Most of the biggest deals, such as the takeover of Celgene by rival Bristol-Myers Squibb for $93 billion including debt, were all-American affairs. Of the 20 largest transactions, 15 were between a US-based buyer and seller. Leaving aside the $36 billion spinoff of its internet investments by Naspers of South Africa, the only genuinely cross-border deal in the top 20 was Fiat Chrysler Automobiles' merger with French rival Peugeot.
Squabbles about tariffs reflect a cooler climate for cross-border combinations. For Chinese buyers, any large transaction in a Western country risks becoming a political football, as state-owned China Three Gorges found in 2018 when it attempted to take control of Portuguese utility EDP Energias de Portugal. Even deals that have already been completed can come under scrutiny. The Committee on Foreign Investment in the United States forced Chinese gaming company Beijing Kunlun Tech to sell dating app Grindr amid concerns over its access to sensitive data.
European companies also proved less appealing. Washington's spats with Brussels over aerospace subsidies and taxing tech giants may be partly to blame, but sluggish growth is probably a bigger factor. Total M&A activity involving European targets was down more than 25 percent on the previous year, while equity raised by European companies has fallen more than 18 percent.
Even if the United States and China declare a trade ceasefire, resistance to M&A is unlikely to ease. While reduced uncertainty over Brexit may kick-start dealmaking in the United Kingdom, the trend towards reversing globalisation looks entrenched. Cross-border dealmaking is just one of the victims.
Worldwide mergers and acquisitions totalled $3.8 trillion in the year to Dec. 26, down 3.5 percent compared with the same period of 2018, data from Refinitiv showed. Cross-border deals in the same period fell 25 percent to $1.1 trillion.
Comments
Comments are closed.