US dealmakers /M & A / FT article today2 Oct 2022 12:43
US dealmakers hope strong dollar will alleviate M&A drop
Fall in sterling and Europe’s economic problems raise prospect of cheap assets after drop in deals
The nine months to September have been the slowest for dealmakers since the start of the coronavirus pandemic in 2020
US mergers and acquisitions activity has dropped 40 per cent year on year in volume terms but dealmakers hope the strengthening dollar will drive a flurry of activity in the coming months as buyers snap up cheap assets in the UK and Europe.
Just $1.2tn worth of transactions have been agreed in the US so far this year, according to data from Refinitiv. That is the slowest nine months since the start of the coronavirus pandemic in 2020, which preceded a boom in dealmaking. By comparison, M&A volume was down by 30 per cent in the Asia Pacific and 25 per cent in Europe for the same period.
However, US dealmakers find themselves in a strong position for cross-border transactions as Britain and Europe grapple with a cost of living crisis and a war that is much closer to home.
Guy Hayward-Cole, head of Europe, Middle East and Africa advisory at Nomura, said the sharp drop in sterling in recent weeks creates an opportunity for many US buyers. “If you thought that UK stocks were cheap beforehand, well then for anyone who’s got US dollars to spend it’s become very cheap,” he said.
However, he cautioned that buyers may want to bide their time. “As the UK outlook becomes so uncertain will it hold back from buying or will it actually attract bargain hunters? For strategic buyers, this could be a very interesting and opportune time to make a move on companies that they’ve always liked,” he said. “Other people will want to sit back and watch what happens for a bit.”
Global M&A is down 34 per cent from the same period last year to $2.7tn in the nine months to September. Dealmakers struck $642bn worth of deals in the third quarter, breaking a historic run for M&A where global transactions exceeded $1tn for eight consecutive quarters.
“As the global economy has been hit by serious headwinds, M&A activity has been a prime casualty. Interest in consolidation continues in many sectors so we are busy, but getting deals across the finish line at the moment is truly challenging,” said Frank Aquila, senior M&A partner at Sullivan & Cromwell.
Private equity firms, once a bright spot for softening M&A markets, are facing their own reckoning as financing conditions tighten and hamper their ability to get large deals done. Globally $642bn in buyouts have been
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