The first quarter of 2018 has seen a strong start in mergers and acquisitions (M&A) worldwide, with the volume of deals increasing by 67% in the USA, 11% in Asia and doubling in Europe.
According to Mergermarket, the value of M&A in Q1 2018 has also increased, reaching USD 890.6bn, an increase in value of 18% from Q1 2017 and the strongest ever start on Mergermarket record. The average deal size also reached a record high for the database at USD 506m.
Honing in on Europe specifically, the UK topped the charts for the volume of deals completed in Q1 and was third worldwide after China and the USA. In terms of deal value, the UK was third in Europe and fifth globally, increasing the value of its deals from USD 65,169 in Q4 2017 to USD 76,890 in Q1 2018.
Commenting on UK deal making, Steve Ivermee, EY’s Managing Partner for Transaction Advisory Services in the UK and Ireland, said: “The UK deals market has experienced a very healthy start to the year as UK companies with a presence in international markets remain particularly attractive to international investors. More significantly, we see UK businesses continuing to make deals internationally.”
The strong start can be attributed to factors such as economic growth in Europe, which has somewhat diminished concerns regarding the economy, political and regulatory uncertainty, market volatility, and valuations.
Despite this, in a survey of 1,016 executives undertaken by Deloitte and looking at M&A trends in 2018, global economic uncertainty is the main concern for thwarting potential deals over the next 12 months, although this figure has decreased since its Autumn 2016 report from 26% of respondents to 20%.
The use of cash reserves also appears to be a factor in the surge in deal making, as the number of Deloitte respondents with additional cash reserves increased (from 58% to 65% over the past two years) with 40% of all respondents stating that the primary usage of this cash was for M&A deals.
Going forward, the positive start looks set to continue, with Steve Ivermee predicting: “Looking ahead we can expect an equally strong Q2 as businesses look to lock in more favourable financing prior to any interest rate increases.”
On top of this, 63% of executives in the Deloitte survey believe that deal sizes will increase and 34% stated they would stay on a level compared with 2017.
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