Global merger & acquisition deals have seen an exponential hike for the first month of the year, amounting to $224 billion in total. Though M&A activity has been trending since 2012, this easily outshoots figures of the previous decade, recording an all-time high since 2000.
Another prominent observation is that for the first time since 2008, Europe came reigning as the top market instead of North America with large retail businesses agreeing to be bought. The European market clocked up to a total of $90.8 billion.
What caused the spike in deals?
According to Bloomberg, one possible reason for the upsurge is to get ahead of the game before uncertainty hits. With Trump’s presidency, many expect to see constant ripples shake their industry soon. While he is perceived to be a businessman who will build a more conducive business environment, his unpredictable and over the top policies might have prompted firms to accelerate their plans before any Trump surprises.
Trump’s opposition to Time Warner Inc’s deal with AT&T (citing the problem of power struggle) and his recent firing of attorney-general are cases that have bred a sense of urgency to “rush through M&A activity” before the administration catches up, according to Ken Odeluga, an analyst at City Index, London.
What lies ahead
More M&A deals are expected to come up in the year ahead. Based on a study conducted by Citi Canada, the relevance of the country’s political and economic status is minimal, evidently seen in the tumultuous year in 2016 and the relative M&A growth in 2016.
It ultimately relies on the ability of firms to capitalise on their stable finances, their capability to identify and acquire international assets, and the low interest rates that aid firms to scour the market and encourage private equity holders. In the survey conducted with Canadian firms, 2/3 of them expect a rise in M&A deals, with 72% of them seeing Asia Pacific being the most notable region for greater cross-border activity.
Similarly in the US, billionaire investor Alex Waislitz believes there will be a surge of M&A deals as companies compete fervently in the market to takeover one another and noted the strong business sentiments there
