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Uncertainty sets global M&A activity back 26.8 per cent

An uncertain environment in 2016 caused by the UK’s referendum on European Union (EU) membership and US elections has negatively impacted M&A activity, setting global M&A back 26.6 per cent during the first half of 2016.

Total deals were worth USD1.32 trillion compared to USD1.81 trillion in H1 2015, and down 66.8 per cent versus USD3.98 trillion in H2 2015.
 
That’s according to Mergermarket’s H1 trend report which reveals that the build-up and announcement of Brexit sent shockwaves through the dealmaking community.
 
The UK’s second quarter featured the country's referendum and resulted in its Q2 value (USD19.3 billion) crashing 50.5 per cent from Q1 2016 (USD38.9 billion).
 
Firms postponed deals, cautious of the impact exchange rates and questioning what they will actually be buying into, unaware of how future negotiations will affect them.
 
Foreign acquirers are delaying transactions, with the value of inbound deals plummeting more than half (-60.1 per cent) from Q1 2016 (USD32.8billion) into Q2 2016 (USD13.1billion).
 
Private equity firms are holding back from casting any confidence in the long-term UK environment – buyouts of UK companies amounted to only USD4.9billion, three quarters less (75.4 per cent) than H1 2015.
 
The report also highlights that China’s spending spree adding pressure to US and European bidders in auction processes is set to increase – the Chinese government selects which company it wants to bid for a non-Asian firm, but it will relax these regulations and allow multiple bidders if the foreign company is worth more than USD2billion.
 
China has made four of its largest outbound acquisitions on Mergermarket record in 2016, buying quality over quantity – Chem China/Syngnenta (USD45.9 billion), Tencent Holdings/Supercell Oy (84.3 per cent for USD8.6 billion), Anbang Insurance Group/Strategic Hotels & Resort (USD6.5 billion) and Tianjin Tianhai Investment/Ingam Micro (USD6.1 billion). The country has already broken all annual totals for European (USD75.4 billion) and US (USD32.9 billion) acquisitions, up 156.6 per cent and 179.4 per cent, respectively from 2015.
 
German M&A, meanwhile, rebounded as a buyer and a seller during H1 2016 after a dip in 2015. As a target, Germany attracted USD30.3 billion worth of deals, with industrials & chemicals M&A (USD17.6 billion in H1 2016, up 252.9 per cent from H1 2015) and Chinese buyers (USD8.6 billion) accounting for a 28.4 per cent share, being the key drivers. The country also emerged as a keen buyer with outbound deals worth USD51.4 billion being 90.7 per cent above the whole of 2015 (USD27 billion). 

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