The China trade war is killing global appetite for M&A

David
Becker/Stringer

• Mergers and acquisition deals have fallen by $783 billion in
  the third quarter of this year compared with the prior quarter, a
  decline of 35%, Reuters
  reported.
• “We’ve got some clouds on the horizon, vis a vis a trade
  skirmish, or potentially a trade war with China” Citigroup’s
  global co-head of M&A, Mark Shafir told Reuters.
• “Anything that points to uncertainty and a lack of confidence
  is not good for M&A,” Hernan Cristerna, JPMorgan’s Global
  Co-head of M&A
  told Business Insider on September 24. “A prolonged trade
  war will, of course, mean large cross-border deals are more
  difficult and harder to get across the line.

The Trump-China trade war has already torpedoed at least one mega
merger. Bankers aren’t so optimistic at it stopping
there. 

Mergers and acquisitions are down globally by $783 billion in the
third quarter of this year, marking a decline of 35% from the
quarter before, Reuters
reported. Qualcomm’s decision to cancel its $44 billion
acquisition of NXP Semiconductors back in July made
it high profile victim of a bitter Sino-U.S. trade
spat — China’s delay in offering an antitrust nod was seen as
retaliation for US tariffs.  

The events have caused doubt about other possible deals involving
China, including the planned $23 billion acquisition of Rockwell
Collins by aerospace supplier United Technologies.

“Anything that points to uncertainty and a lack of confidence is
not good for M&A,” Hernan Cristerna, JPMorgan’s Global
Co-head of M&A
told Business Insider in a separate interview on September
24. “A prolonged trade war will, of course, mean large
cross-border deals are more difficult and harder to get across
the line.”

There has been a drop in the volume of global deals by about 6%
compared to a year ago, with the number of new deals announced at
their lowest level since 2013. 

“We’ve got some clouds on the horizon, vis a vis a trade
skirmish, or potentially a trade war with China. You have the
potential for a hard Brexit and we’ve got rising rates,”
Citigroup’s global co-head of M&A, Mark Shafir, told Reuters.

US M&A fared better then other regions in the quarter, and
the first nine months of 2018 has seen global deal making reach a
record $3.2 trillion. But announced deals in the Asia-Pacific
were down 38% and fell by 14% in Europe. 

“We’re already seeing signs that geopolitical risks, including
trade tensions, are dimming the prospects for large-scale M&A
going into next year,” Cristerna told BI.