Chinese Outbound Deals Cushion Q1 Drop in Cross-Border M&A volumes

Cross Border Index Q1

 
The latest edition of Baker & McKenzie’s quarterly Cross-Border M&A Index finds that despite a turbulent first quarter for the global economy, and capital markets see-sawing amid volatile risk asset sentiment, cross-border M&A proved surprisingly resilient. Chinese investors looked to snap up bargains in the United States, and North and Latin American companies looked to Europe for cheap opportunities.

In the first quarter of 2016, cross-border M&A value rose to $324 billion, 14% higher than the first quarter of last year, while volume dropped 10% to 1,202 deals. The economic slowdown in China, the UK’s potential exit from the EU and volatile equities markets and the fall in commodities prices all contributed to the decline in volume. The trend of cross-border mega deals continued from 2015.

Both value and volume globally were down significantly on Q4 2015, as expected given it was the busiest quarter of a record year for M&A.

Baker & McKenzie’s Cross-Border M&A index tracks quarterly deal activity using a baseline score of 100. It dropped to 213 in Q1 from its peak of 358 last quarter. However, it was still seven points higher than the same period last year.

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Michael DeFranco

“As expected, after a record Q4, dealmakers paused for breath at the beginning of the new year in light of macro noise from volatile capital markets, uncertainty over Chinese growth potential, and political developments in the EU,” said Michael DeFranco, Baker & McKenzie’s global head of M&A.

“However, while these headwinds dampened transaction activity initially U.S. equity markets then rebounded and Chinese companies demonstrated their economic power with record outbound investments, leading to a significant turnaround in March dealmaking.”

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