Global M&A Reached $224 Billion in January

EghtesadOnline: With pent-up demand from 2016 and the challenges of an unpredictable US administration ahead, companies seeking to get deals done kicked off this year with a bang.

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02 February 2017

Global mergers and acquisitions activity amounted to $224 billion in January, the highest volume since 2000 in the first month of the year, according to data compiled by Bloomberg. For the first time since 2008, Europe topped North America on the list of target regions, as firms from Swiss drugmaker Actelion Ltd. to Italian eyewear maker Luxottica Group SpA agreed to be bought.

Pent-up demand from last year, when investors had to contend with volatile markets, and rising bond yields, which make debt financing for deals more expensive, have contributed to the surge, analysts say. But this January, investors have received an additional incentive: Donald Trump.

While some speculate the US president’s appointment of a pro-business cabinet signals a deal-friendly approach, others note his repeated objection to the mega-merger between AT&T Inc. and Time Warner Inc. as cause for concern, Financial Tribune reported.

“There might be a sense of ‘Let’s get these deals done and dusted before Trump really gets into a stride’,” Jasper Lawler, a market analyst at London Capital Group, said by phone.

Trump’s actions over the past week, including an executive order on immigration and the firing of the acting attorney general Sally Yates when she refused to defend it, have unnerved investors across markets. His recent decisions have dimmed the enthusiasm that had gripped investors since his election, with the most popular trades showing signs of fading.

Power & Renewables

The power and renewables M&A market saw total value hit $293 billion last year, up from $199 billion the year ago. In the US a number of mega deals saw total value surpass recent decade highs, while in Asia Pacific and Europe, deal volumes were boosted as companies bought up renewables and transformation innovation, consultancy.uk reported.

The power and renewables industry continues to face considerable flux as a range of factors, from digitalization to sustainable transformation, affects the industry.

In a new report from PwC, titled ‘Power & Renewables Deals’, the research notes that 2016 was a buoyant year for the market, as the search for yield, inorganic growth and transformation spurred companies to leverage M&A. In total, last year saw substantial deal values relative to the year previous, up from almost $199 billion to hit almost $293 billion.

Total deal value was also up considerably on five years previous, at almost doubled the value of 2012 and 2013, at $149 and $151 billion respectively. North America remains the key market place for deals, totaling 57% of total value, followed by Asia Pacific on 18% and Europe on 17%.

The research also considers how 2017 will look, particularly in the face of a host of political and market structural challenges. One market dampening effect noted by the firm is rising interest rates and changes to regional economic outlooks—both effects are, the firm argues, likely to see momentum slow. Climate change politics, particularly in the face of the Trump presidency, are not—the firm believes—likely to significantly dampen the industry’s turn towards renewables and climate change mitigation.

Renewables deals continue to grow in frequency, now comprising more than half of global deal volume.

In the Asia Pacific, deal volume far surpassed that of North America, jumping to 315 deals from 2015’s 305 deals. Deal value, however, saw a slight decrease, falling from $66 billion to $50 billion. While deal volumes have been relatively high since 2013, deal values have only in the past two years surpassed the $50 billion mark. Many of the deals last year were in the renewables segment, at 198, up from 151 the year previous.