As was predicted in our discussion of Q4 2016 here, the last quarter of the year proved to be busy. Global M&A in the final quarter reached $1.2 trillion, which was not only the busiest period in 2016, but also raised the total for M&A to $3.6 trillion. Although the total value of deals decreased by 17 per cent from 2015, the final flurry of large takeovers allowed 2016 to reach the second-highest total since the financial crisis in 2007, according to the Financial Times.
Chinese companies in particular demonstrated their ability to be a major force in cross-border M&A in 2016 by almost doubling their 2015 transaction amount to $220 billion. In contrast, Thomson Reuters data indicates that North American companies were less diverse in their dealmaking, with $1.3 trillion worth of M&A being done domestically.
From the UK's decision to leave the EU to Donald Trump's election, 2016 faced a series of obstacles and uncertainty for M&A activity. In addition, regulatory clearance remains a critical obstacle, as was seen by the backlash against a wave of deals struck by Chinese buyers in the US and the EU. Withdrawn M&A reached an eight-year high in 2016, climbing to $804.7 billion.
Nevertheless, the Financial Times notes that advisers claim that in spite of these challenges, the M&A boom seen in Q4 2016 will carry on. Many companies face poor organic growth, which forces them to look elsewhere. With the continuation of historically low borrowing rates, buying rivals or expanding is an attractive choice. While 2017 may not see the record highs of 2015, given that M&A was able to stand strong in the face of uncertainty, there is reason to believe that the year to come can do the same.
The author would like to thank Simone Nash, Articling Student, for her assistance in preparing this legal update.
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