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13 October 2016

Volume of global M&A dips in Q3, but value shoots up

Political and macroeconomic uncertainty have continued to stifle cross-border M&A activity, but the re-emergence of the megadeal has seen their overall value rocket since Q2.

By Victoria Basham


According to Baker & McKenzie's Cross-Border M&A Index for Q3 2016, buyers announced 1,275 cross-border deals worth US$373bn, dropping 22 per cent in volume and 5 per cent in value compared to Q3 2015. However, the firm reports that large multinational strategic buyers' focus on growth through acquisition pushed cross-border valuations up 64 per cent from Q2 2016.

The dip in deal volume this quarter was not a surprise for many as mid-market M&A volumes traditionally dip around US elections and we continue to experience political and macroeconomic uncertainty globally,’ said Michael DeFranco, chair of Baker & McKenzie's Global M&A Practice. ‘On the flip side, while still down from a year ago, we are beginning to see a re-emergence of the megadeal.’

The increase in deal value was largely driven by renewed confidence at the upper end of the market, with several blockbuster deals being announced. While deals above US$1bn were down 25 per cent when compared to Q3 2015 they were a regular occurrence, particularly for inbound deals into the US.

Regions and Sectors

Despite the UK’s referendum result sending shockwaves through the EU M&A market in Q3, EU outbound deals accounted for 44 per cent of all cross-regional M&A value in Q3. Deals from the EU into North America saw record values with US$105bn from 121 deals, an increase of 32 per cent year-over-year. Cross-regional EU inbound deal volume slumped by 30 per cent when compared to Q2 2016 and 24 per cent compared to Q3 2015.

Asia-Pacific buyers carried out 174 cross-regional deals in Q3 worth a record high US$86bn, an increase in value of 30 per cent on Q3 2015 and 67 per cent on Q2 2016, representing 32 per cent of all cross-regional activity. Japan was the most active Asian buyer by value, with 69 deals worth a total of US$44bn, sparked in part by negative interest rates and strong corporate balance sheets. China is on pace for a record year in outbound M&A deal value and volume. Through the first nine months of 2016 the total outbound deal value was US$165bn, an increase of 129 per cent year-over-year, and total outbound deal volume was 290, an increase of 27 per cent year-over-year.

Chemicals and materials, energy and utilities, and technology were the drivers of high value M&A, with deal totals of US$77bn, US$73bn and US$60bn respectively.

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