HSBC Holdings Share News (HSBA)

By Greg Roumeliotis and Pamela Barbaglia

NEW YORK/LONDON, March 30 (Reuters) - Global mergers andacquisitions (M&A) had their strongest start ever in the firstquarter of 2018, totaling $1.2 trillion in value, as U.S. taxreform and faster economic growth in Europe unleashed manycompanies' dealmaking instincts.

Strong equity and debt markets and swelling corporate cashcoffers also helped boost the confidence of chief executives,convincing them that now is as good a time as ever to pursuetransformative mergers, dealmakers said.

"The clarity on tax has unclogged some of the M&A activitythat was strategically imperative, but companies were waitingfor the right financial timing," said Anu Aiyengar, head ofNorth America M&A at JPMorgan Chase & Co.

While the value of M&A deals globally increased 67 percentyear-on-year in the first quarter of 2018, the number of dealsdropped by 10 percent to 10,338, preliminary Thomson Reutersdata show, reflecting how deals on average are getting bigger.

Among the largest deals clinched this quarter were U.S.health insurer Cigna Corp's $67 billion deal to acquire U.S.pharmacy chain Express Scripts Holding Co and Germanutility E.ON SE's $38.5 billion deal to acquire RWEAG's renewable energy business Innogy SE.

M&A volumes doubled in Europe in the first quarter, whilethe United States was up 67 percent and Asia was up 11 percent.

"The better macro-economic environment in Europe has createdgreater confidence to get things done. Deals that have been inthe works for a long time are now coming to fruition and someindustries like utilities are being completely reshaped by thelatest wave of consolidation," said Borja Azpilicueta, head ofEMEA Advisory at HSBC Holdings Plc.

In the United States, the stock market rally was thwarted inthe first quarter by U.S. President Donald Trump's announcementson trade tariffs on Chinese imports. Corporate valuations arestill elevated, but market volatility has increased.

"Companies have become more aggressive in pursuing dealsthat make strong strategic sense. But valuations remain high andboards have recently become more cautious on large acquisitions,as it is more difficult to convince their investors of thepotential for value creation at such price levels," saidGilberto Pozzi, co-head of global M&A at Goldman Sachs Group Inc.

Regulatory risk has also increased. Trump's dramaticintervention that blocked Singapore-based Broadcom Ltd's$117 billion hostile bid for U.S. chip maker QualcommInc on grounds of national security earlier this monthunderscored heightened U.S. concerns about losing out to Chinain the race for new technologies.

"While every auction used to see at least one Chineseparticipant, now people are questioning their ability to deliverand are conscious of the political pushback that Chinese bidderscould face," said Johannes Groeller, a partner at PJT PartnersInc.

On the antitrust front there is also some uncertainty. TheU.S. Department of Justice has sued to block U.S.telecommunications company AT&T Inc's $85 billion deal tobuy media company Time Warner Inc over concerns abouthow the two companies would consolidate their sectors.

"The antitrust environment for M&A transactions seemsfavorable today though certain deals, which catch the attentionof regulators or politicians for one reason or another, can beproblematic," said Jack Levy, a partner at Centerview PartnersHoldings LP.

"One should resist the temptation to conclude from thosespecific deals that the antitrust regime has become moredifficult," Levy added.(Reporting by Greg Roumeliotis in New York and Pamela Barbagliain LondonEditing by Jacqueline Wong)