Headlines

  1. Cross-border M&A made up 44% of all deal value and 34% of all deal volume in Q3 2016, compared with 41% and 36% for the same period in 2015.
  2. Deals from the EU into North America hit record values with US$105bn from 121 deals. This is an increase of 32% on Q3 2015.
  3. Asia Pacific buyers carried out 174 cross-regional deals in Q3 worth a total of US$86bn, an increase in value of 30% on Q3 2015 and 67% on last quarter.

The result of the UK referendum sent shockwaves through the EU M&A market in Q3. Cross-regional deal flow into the EU slumped to 271 deals, 30% fewer than Q2 2016 and down 17% on Q1 2016. The result, as well as other geopolitical issues, appears to have spooked a number of regions as volume fell 15% quarter-on-quarter and 22% year-on-year.

Deal values were a different story. Overall, cross-border deal value grew 64% quarter-on-quarter. This is particularly true of EU outbound, which accounted for 44% of all cross-regional M&A value in Q3. Transatlantic deal value in this direction reached a record high, with EU buyers picking up US$105bn in US assets – an increase of 32% year-on-year. This stemmed mainly from Bayer AG’s US$65bn acquisition of US-based Monsanto, but Q3 included other large transactions such as UK-based Micro Focus’s purchase of Hewlett Packard Enterprise for US$8.8bn. 

Overall cross-regional deal value into North America grew by 317% from US$42bn in Q2 to US$133bn in Q3.

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The Asian equation

The increase in quarterly deal values was prevalent across most regions – particularly outbound from Asia Pacific, which has already reached record highs – and this buoyancy continued in Q3 with buyers from the region carrying out 174 cross-regional deals worth a combined US$86bn, representing 32% of all cross-regional activity. 

Japan was the most active Asian buyer, with 69 deals worth a total of US$44bn, sparked in part by negative interest rates and strong corporate balance sheets. Along with major acquisitions in the UK, France and the US, Japan also carried out the largest African acquisition of the quarter and the third largest so far in 2016 with Japan Tobacco buying a 40% stake for US$510m in National Tobacco Enterprise in Ethiopia.

Out of Africa

Cross-regional deals with African buyers hit US$4.8bn, the second largest value from the continent since the Index began. This was driven by activity originating in South Africa, with Steinhoff International Holdings buying US-based Mattress Firm Holding for US$3.9bn, following the purchase of a 76.4% stake in UK discount group Poundland for US$640m. These deals will significantly enhance the African retailer’s global footprint and diversify revenue streams as well as serve as a currency hedge for the vulnerable domestic rand. In another similar South African outbound deal, Famous Brands purchased the UK’s Gourmet Burger Kitchen for US$158m.