BY Fraser Tennant
M&A activity in North America instigated by Chinese investors dropped sharply in 3Q 2019, according to a new report by Pitchbook.
In its ‘3Q 2019 North American M&A Report’, the financial information and technology provider reveals that a little over $20bn worth of North American M&A deals with Chinese acquirers have been consummated in 2019 through 3Q – a massive downturn from the $298.5bn that was invested in 2016.
According to the report, the plummeting M&A activity by Chinese acquirers is due to the increasingly tense relationship between the US and China being played out in the trade war, with a seemingly unending series of tit-for-tat tariffs the order of the day in recent years.
“M&A has been one of the areas hit hardest by the trade war, with deal value for North American target companies with a Chinese acquirer on pace to fall by over 90 percent since peaking in 2016,” states the report. “The US/China trade war rages on and has led to a precipitous decline in cross-border activity, with far fewer Chinese companies willing or able to acquire US companies.”
Furthermore, not only have American and Chinese companies avoided doing deals together, but the US government has occasionally prevented deals, with the Committee on Foreign Investment in the US (CFIUS) blocking a number of major transactions, such as Singapore-based Broadcom’s $100bn-plus attempt to purchase Qualcomm, reportedly on national security grounds.
Beyond the waning M&A activity between the two economic powerhouses, the report notes that North American M&A activity continues apace, with 3Q 2019 seeing robust deal flow totalling over $600bn. Drilling down, eight deals above $10bn closed during the quarter, accounting for over one-third of total deal value.
“In 2019 to date, we have seen over 8000 deals close with an accumulative value of nearly $1.6 trillion, approximately on pace with the first three quarters of 2018,” adds the report. “Much of this quarter’s total value was attributed to just a few colossal deals, such as such as Bristol-Myers Squibb’s $74bn acquisition of Celgene and BB&T’s $66bn acquisition of SunTrust Bank.”
The report concludes: “We expect M&A value to end the year on a high note, barring any broader economic slowdown.”
