28 Sep, 2018
How Trump’s China spat is killing global appetite for M&A
The Trump-China trade war has already torpedoed at least one mega merger. Bankers aren’t so optimistic at it stopping there. Mergers and acquisitions are down globally by $783 billion in the third quarter of this year, marking a decline of 35% from the quarter before, Reuters reported. Qualcomm’s decision to cancel its $44 billion acquisition of NXP Semiconductors back in July made it high profile victim of a bitter Sino-U.S. trade spat — China’s delay in offering an antitrust nod was seen as retaliation for US tariffs.
US President Donald Trump’s escalating trade war has cast doubt about other possible deals involving China, including the planned $23 billion acquisition of Rockwell Collins by aerospace supplier United Technologies.
There has been a drop in the volume of global deals by about 6% compared to a year ago, with the number of new deals announced at their lowest level since 2013.
«We've got some clouds on the horizon, vis a vis a trade skirmish, or potentially a trade war with China. You have the potential for a hard Brexit and we’ve got rising rates," Citigroup’s global co-head of M&A, Mark Shafir, told Reuters.
US M&A fared better then other regions in the quarter, and the first nine months of 2018 has seen global deal making reach a record $3.2 trillion. But announced deals in the Asia-Pacific were down 38% and fell by 14% in Europe.
We’re already seeing signs that geopolitical risks, including trade tensions, are dimming the prospects for large-scale M&A going into next year