Strong H1 for M&A deals – up 22% but confidence likely to impact European deal makers in Q3
30 June 2015
The Deloitte M&A Index predicts global deal making volumes in Q3 to remain at similar levels to Q2 2015, as European companies take a pause from M&A markets.
Global M&A deal values have reached (US) $1.8 trillion so far this year, a 22% increase on the $1.5 trillion for the first half of 2014. This surge was led by activity from US corporates which accounts for 46% of the global announced deals. This was fuelled by a war chest of $1.62 trillion cash reserves for the year 2014 for the S&P 500 non-financial companies. The favourable market conditions together with pressure from investors means there has also been an increase in hostile deal announcements, which now stand at $240 billion so far this year, the highest level since 2007.
Iain Macmillan, head of M&A at Deloitte, commented: “US deal making is on a roll and the corporate sector has been taking advantage of a rise in stock price and the stronger dollar to lead the charge, particularly with cross-border European deals. It is also prompting some companies to take aggressive measures, and we have seen a sharp increase in hostile and unsolicited bids this year. However, within Europe the political risks and currency pressures have dampened the confidence for deal making, which has already fallen compared to last year.”
The Deloitte M&A Index predicts global deal making volumes in Q3 to remain at similar levels to Q2 2015, as European companies take a pause from M&A markets. So far this year, $276 billion worth of deals were announced by European corporates, compared to $401 billion in H1 2014. The hardest hit has been outbound acquisitions, only $44 billion worth of outbound deals have been announced, much lower than the $83 billion for H1 2014.
For the first time, in 2014, emerging market M&A into G7 countries has outpaced G7 (M&A) into emerging markets. So far this year emerging markets have announced $29 billion worth of deals into the G7, outpacing the $19 billion worth of deals from the G7 to emerging markets, with China leading the way.
Chinese companies have announced $42.4 billion worth of overseas deals, of which publicly–listed companies announced $25.6 billion, outpacing privately owned companies for the first time. Chinese companies are in the middle of an IPO boom and we expect IPO proceeds could be used to power M&A ambitions.
Iain Macmillan concluded: “The political risks and currency pressures in Europe are likely to dampen confidence in Q3 and could spill over to global M&A markets. However, the market credit conditions remain favourable and companies are sitting on record piles of cash, so we remain cautiously optimistic for M&A this year.”
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