The US political climate could impact deal activity in the near term.
Submitted by Mergermarket, an M&A Leadership Council partner organization
This month brought more news from DC (the blocking of Broadcom/Qualcomm; Tillerson out; etc.) that has some worried about how this could potentially affect the deal-making market. While it is too soon to tell, here is a round-up of Mergermarket’s, an Acuris company, intelligence and data to help shed some light on dealmakers’ attitudes and activity over the last few months:
According to Mergermarket intelligence:
- Amid increased scrutiny from the Committee on Foreign Investment in the United States (CFIUS), Chinese companies are starting to outright avoid US technology deals. Expectations that CFIUS’ mandate will be expanded and wariness of US suspicion toward what it sees as China’s centrally-planned rather than market-oriented approach to economic expansion are among the factors combining to ward Chinese bidders away from the US technology sector.
- One source said they are recommending Chinese clients avoid US technology deals completely, citing lost time, advisory fees, and even the negative effects on the bidder’s “branding” from a rejected deal.
According to Mergermarket data:
- Data through 13 March 2018 show that foreign bids for US companies have fallen in YTD 2018 to US$ 79.8bn and 154 deals, a 39.7% drop in value and fall in deal count by 77 transactions from the same period in 2017, which had seen US$ 132.5bn and 231 deals.
- The largest transaction involving a US target and a foreign bidder so far in YTD 2018 is France-based Sanofi’s US$ 11.1bn bid for US-based biotech firm Bioverativ.
- Following President Trump’s block of Broadcom’s attempted bid for Qualcomm, an unprecedented move in the M&A world, dealmakers could start to be even more cautious about cross-border deals, especially in the Tech industry as well as between the US and China and any countries seen as having close relations with China.
In YTD 2018, there have been seven announced deals with Chinese bidders and US targets worth a total of US$ 813m. Deal count dropped by half from 14 transactions while deal value plunged 44% from US$ 1.5bn in YTD 2017.