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A rise in large mergers and acquisitions (M&A) helped offset a plunge in cross-border deals in 2019, and many deal-makers say they expect subsiding geopolitical risk to embolden companies to pursue more tie-ups across regions in 2020.

The value of M&A globally totalled about US$3.9-trillion in 2019, making it the fourth strongest year for deal-making, according to preliminary figures published by financial data provider Refinitiv. This is only slightly lower than the US$3.96-trillion in deals recorded in 2018.

Cross-border M&A totalled US$1.2-trillion, down 25 per cent year on year to its lowest level since 2013, as rising geopolitical uncertainty and regulatory scrutiny of deals made many corporate chiefs and boards wary of expanding beyond their home markets.

“Companies were more comfortable this year doing deals within their own regions given the macroeconomic risks such the trade tariffs and Brexit, so cross-border M&A was down,” said JPMorgan Chase & Co. global M&A co-head Chris Ventresca.

Large deals, on the other hand, were on the rise, as companies were spurred on by their strong stock performance and cheap financing to pursue transformative acquisitions.

The number of M&A transactions worth more than US$10-billion increased 8 per cent year on year to 43 this year, their highest level since 2015, according to Refinitiv. Some 21 deals, each worth more than US$20-billion, accounted for almost a quarter of global volume in 2019.

“Megadeals were the main feature of this year’s deal-making, especially in the United States, where the bulk of these transactions took place,” said Goldman Sachs Group Inc. global M&A co-head Gilberto Pozzi.

The biggest deals of the year included U.S. drug maker Bristol-Myers Squibb Co.’s US$74-billion acquisition of Celgene Corp; U.S. defence contactor Raytheon Co.’s merger with the aerospace business of United Technologies Corp. into a US$135-billion company; and U.S. pharmaceutical company AbbVie Inc.’s US$64-billion purchase of Botox maker Allergan Plc.

The United States accounted for close to half of global M&A volume in 2019, with US$1.8-trillion worth of deals announced, up 6 per cent from a year ago. Europe and Asia tied for a distant second, with a little more than US$740-billion worth of M&A transactions announced in each region.

“Europe has been hit by macroeconomic headwinds in key markets, including Britain, Germany and France, where Brexit uncertainty, slow growth and social unrest have been some of the main hurdles,” said Pier Luigi Colizzi, Barclays Plc’s head of M&A for Europe and the Middle East.

In Britain, Europe’s largest M&A market, deal-making dropped 4 per cent year on year to US$220.6-billion, with much of the year dominated by political debate over when and how Britain will leave the European Union.

“Market uncertainty in the U.K. has played in favour of private equity funds, which have been very active and have carried out a number of take-private deals, including Merlin Entertainments, Sophos and Cobham,” said Cyrus Kapadia, chief executive officer of Lazard Ltd.’s British operations.

In Asia, China’s economic slowdown led to M&A volume in the country dropping 14 per cent year on year to US$380.3-billion, while the political turmoil fuelled by Hong Kong’s pro-democracy turmoils unnerved deal-makers in the wider region.


After world stocks added more than US$25-trillion in value in the past decade, and a bond rally put US$13-trillion worth of bond yields below zero, some investors have been asking whether a recession could be around the corner that would put the brakes on the wave of deal-making.

Yet companies have not been holding back on M&A because of concerns about an economic slowdown, deal advisers say.

“The next economic downturn is not expected to be as severe as the 2008 financial crisis, and when it happens many well-capitalized companies may seek to capitalize on a drop in corporate valuations to pursue their dream deals,” said Perella Weinberg Partners chief executive officer Peter Weinberg.

The U.S. economy grew 2.9 per cent in 2018, but forecasts for 2019 are for about 2.5-per-cent growth, because of the fading impact of U.S. President Donald Trump administration’s tax-cut package and slowing global growth. At this level, deal-makers say the environment would be conducive for more transactions.

“A lukewarm economy is ideal for acquisitions, because companies need M&A to ensure growth, and business sentiment is sufficiently strong for CEOs and boards to be comfortable with pursuing deals,” said Sullivan & Cromwell LLP partner Frank Aquila.

Moreover, some of the geopolitical risks that weighed on cross-border M&A in 2019 are gradually dissipating. The United States and China are close to signing their Phase 1 trade deal, while a strong electoral victory for Britain’s Conservative Party earlier this month offered clarity on the country’s timetable for Brexit.

“About a month and a half ago, activity levels started to pick up, and it seems people feel a lot better about the M&A pipeline,” said Alan Klein, co-head of Simpson Thacher & Bartlett LLP’s M&A practice.

Despite the boom in deal-making over the past few years, global M&A volumes are below their long-term average when viewed against the value of equity markets or global economic growth. Some deal advisers cite this to argue M&A volumes are not close to reaching a ceiling.

“In real terms, we have a good but not great level of M&A activity, with the potential for upside,” said Citigroup Inc. global co-head of M&A Cary Kochman.

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