Daily Management Review

The First Quarter Of 2017 Marked By Record High Values Of M&A Globally


03/30/2018




The First Quarter Of 2017 Marked By Record High Values Of M&A Globally
The deal making instincts of many companies were unleashed this year by the U.S. tax reforms and faster economic growth in Europe which resulted in a very strongest beginning ever for global mergers and acquisition for the first quarter of 2018. The total value of M&A was $1.2 trillion.
 
The top bosses of companies were convinced about the timing for pursing transformative mergers by the boosted confidence of such executives because of swelling corporate cash coffers and strong equity and debt markets.
 
"The clarity on tax has unclogged some of the M&A activity that was strategically imperative, but companies were waiting for the right financial timing," said Anu Aiyengar, head of North America M&A at JPMorgan Chase & Co.
 
Deals in the first quarter were larger in average price according to preliminary data from Thomson Reuters, as there was a drop of 10 percent in the number of deals to 10,338 while there was an increase in value for M&A deals globally by 67 per cent for the first quarter year-on-year.
 
The acquisition of RWE AG's renewable energy business Innogy SE by German utility E.ON SE in a deal worth $38.5 billion , and the buying of  U.S. pharmacy chain Express Scripts Holding Co by U.S. health insurer Cigna Corp for a deal worth $67 billion were amongst the largest deals made this quarter.
 
While in the U.S. and Asia, the volume of M&A increased by 67 per cent and 11 per4 cent respectively, in Europe the value of the M&S simply doubled for the quarter.
 
"The better macro-economic environment in Europe has created greater confidence to get things done. Deals that have been in the works for a long time are now coming to fruition and some industries like utilities are being completely reshaped by the latest wave of consolidation," said Borja Azpilicueta, head of EMEA Advisory at HSBC Holdings Plc.
 
The announcement of trade tariff by U.S. president Donald Trump on imports of some Chinese goods dampened the stock market rally in the first quarter in the United States. There is increased volatility in the market even though corporate valuations are still elevated.
 
"Companies have become more aggressive in pursuing deals that make strong strategic sense. But valuations remain high and boards have recently become more cautious on large acquisitions, as it is more difficult to convince their investors of the potential for value creation at such price levels," said Gilberto Pozzi, co-head of global M&A at Goldman Sachs Group Inc.
 
There has also been enhanced regulatory risk. The increased concerns of the U.S. about losing out its industries to large Chinese firms while both the countries run the technology race is underscored by the sudden intervention of Trump to stall the hostile takeover bid for U.S. chip maker Qualcomm Inc by Singapore-based Broadcom Ltd for $117 billion. 
 
"While every auction used to see at least one Chinese participant, now people are questioning their ability to deliver and are conscious of the political pushback that Chinese bidders could face," said Johannes Groeller, a partner at PJT Partners Inc.
 
(Source:www.cnbc.com)






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