Cross-border megadeals fall for the first time since 2013 amid trade and political concerns

  • Although the first half of 2018 represented the strongest six months in merger market activity since 2001, cross-border deals have taken a hit.
  • There were 2,834 cross-border deals in the first half of 2018, compared to 3,346 in the same period in 2017.
President Donald Trump speaks
Mandel Ngan | AFP | Getty Images
President Donald Trump speaks

Trade tariffs and political interference have started to hurt cross-border megadeals, a report from Mergermarket showed Tuesday.

Although the first half of 2018 represented the strongest six months in merger market activity since the financial crisis, cross-border deals have taken a hit.

In total, megadeals reached a value of $1.94 trillion in the first six months of the year. However, cross-border mergers dropped nearly six percentage points compared to a year ago and accounted for only 38.2 percent of the total activity so far this year.

There were 2,834 cross-border deals in the first half of 2018, compared to 3,346 in the same period in 2017. The last time a decline happened was in 2013, when cross-border transactions fell to 2,302 from 2,404 deals in 2012.

“With dealmakers now having to contend with a greater level of political intervention and protectionism, the majority of the increase in global M&A (mergers and acquisitions) has been driven by domestic M&A,” the report said.

“Earlier this year, President (Donald) Trump ensured that Qualcomm’s pursuit of Broadcom did not take off and in the first six months of the year, only 38.2 percent of the global M&A value was generated by cross-border activity.”

In March, Trump decided to stop a Broadcom takeover of the Chinese firm Qualcomm, worth $117 billion. The president cited national security concerns to block the deal.

“The introduction of tariffs, the growing threat of trade wars and greater scrutiny over deals may be somewhat responsible for a drop in the impact of cross-border M&A,” the Mergermarket report said.

As a result, companies have started to look at potential partners in their domestic markets. Six out of the 10 largest deals in the first half of 2018 took place domestically.