23 Dec 2019

Global M&A falls in 2019 despite resurgence of mega deals

Research by Allen & Overy finds domestic deals propping up the market as cross-border activity slumps by 27%

Global deal activity has fallen in 2019 with total value down by 7% and volume dropping 10%, according to research by Allen & Overy. But 2019 is still set to be the third most active year to date in terms of deal value and the fourth strongest of the decade when it comes to the number of transactions.

‘The fact that the market is still so strong when anxieties are rising around macroeconomic issues is proof that many investors are keeping their nerve,’ says the report.

‘Most sectors, with the notable exceptions of life sciences and financial services, are feeling the pressure of these more uncertain times, and it is clear that many investors, notably PE funds, are expecting to see an adjustment in the market in the coming months, although not a sharp slowdown. 

‘Next year may well test nerves more sharply, but investors will, we believe, continue to be active, absent significant political or economic shocks.’

The report, which draws on data provided by Refinitiv, found that a steep fall in the value of cross-border deals (27%) was compensated for by a resurgence in domestic mega deals, with deals valued at more than $5bn accounting for 43% of global deal value.

 ‘It is remarkable to note that just 40 deals over $10bn account for over $1trn of value so far this year,’ the report states.

The US accounted for just under half of all global deals by value (48%) – up 1.5% from last year – while the MENA region showed the highest rise in value (134%), thanks largely down to one mega deal: Saudi Aramco’s $69bn acquisition of SABIC.

Western Europe, which accounted for 18% of overall deal value, saw a 27% year-on-year fall in value. Greater China deal value was down by 24%, while Asia as a whole recorded its worst year for M&A since 2014.

The report highlighted Brazil as a hot spot for inbound investment, thanks to the devaluation of the Real, the lowering of interest rates to 4.5% and a ‘huge’ programme of proposed privatisations in the pipeline with more than 100 companies lined up for sale at federal level alone. Research by Baker McKenzie, published earlier this month, blamed political uncertainty across the globe and the poor performance of 'unicorn' tech IPOs on a 20% global decline in public listings in 2019.