Looking back at global M&A activity during 2018, a report on global M&A by Mergermarket shows that while global M&A deal value rose over the last year, the number of deals fell for the first time since 2010. The value of deals rose to $3.53 trillion US dollars, an increase of 11.5% since 2018, making last year the third-largest year on record for deal value since 2001. This rise in value was partly due to 36 deals with value of over $10 billion as well as the pressure felt by companies globally to consolidate, driving firms to compete for targets and increasing target valuations. Despite the rise in deal value, overall volume fell for the first time in a decade. Increasing trade tensions, political instability, the effect of Brexit and increased regulatory oversight are some of the factors believed to have taken a toll on M&A activity in 2018.
One particularly notable trend was the decrease in Chinese acquisitions of US firms, which fell by a staggering 94% in the past year to $3 billion from a record setting year of $55 billion in 2017. Many experts point to a deteriorating political and trade relationship with China as the cause of such a sharp decrease. In contrast, Chinese acquisitions of European businesses rose by over 81% sin the last year, totaling $60.4 billion US dollars in value. In June 2018, Lin Feng, founder and CEO of Chinese investment and advisory firm DealGlobe stated “We are now focusing on Europe-bound deals and having U.S. deals on hold. The trade war between China and U.S., if not short-term, will be a mid-term thing and will take some time to conclude.” With no sign of political tensions easing between the two countries, it will be interesting to see if this trend of Chinese M&A activity will continue in 2019.
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