JPMorgan says Trump’s trade war is ‘dimming the prospects for large scale M&A’

Hernan Cristerna, JPMorgan’s Global Co-head of M&A.JPMorgan

• JPMorgan’s Global Co-head of M&A: “A prolonged trade war will, of course, mean large cross-border deals are more difficult and harder to get across the line.”
• “We’re already seeing signs that geopolitical risks, including trade tensions, are dimming the prospects for large-scale M&A going into next year.”
• Global M&A activity has been buoyant so far this year but large, cross-border deals have markedly declined.

LONDON — Rising geopolitical tensions and the escalating trade war between the US and China are putting management teams off big deals, according to a senior JPMorgan banker.

“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, referring to US President Donald Trump’s ongoing tit-for-tat with China on trade tariffs. 

“A prolonged trade war will, of course, mean large cross-border deals are more difficult and harder to get across the line. We’re already seeing signs that geopolitical risks, including trade tensions, are dimming the prospects for large-scale M&A going into next year.”

Global M&A in the first half of the year reached its highest levels since 2007, according to Dealogic, with over 17,500 deals worth almost $2.5 trillion announced. However, a report from Mergermarket in July showed a marked slowdown in cross-border M&A. There were just 2,834 cross-border deals in the first half of the year, compared with 3,346 last year.

Cristerna said the collapse of deals such as Alibaba’s planned $1.2 billion takeover of Moneygram, which was blocked by the US at the start of the year, and Broadcom’s abandoned $144 billion combinations with Qualcomm, which was blocked by the US on security grounds, has “made some corporate boards think twice about the on-going dispute between the US and China.”

Cristerna said: “The advice we give to all our clients is to be forthcoming and do what’s right for the company. We are all well aware and open-eyed to all the different risks, but companies can’t put their corporate agenda on hold because of what might happen. We’re urging them to be alert and responsible, but not to be overwhelmed by the geopolitical challenges.”

JPMorgan has had a strong year for M&A so far. The bank made close to $1.2 billion in global M&A revenues in the first half of 2018, according to a recent report from business intelligence provider Coalition. That was 20% more than it made from M&A in the first half of 2017 and makes it the number one M&A bank by revenue globally in the first half.