Benchmark

US Hive of Deal Activity from Increasing Outbound Investment

Posted on July 27, 2018 By

Statistics for H2 2018 have shown that the US is a hotspot for deal activity as it has been the recipient of increasing outbound investment, particularly within North West England as, according to Deloitte, nearly 40 per cent of the North West’s transactions involved a US company.

The US’ position as an attractive prospect for investment was highlighted by the A.T. Kearney Foreign Direct Investment Confidence Index’s 2018 report, as it topped the table for FDI for the sixth consecutive year, as well as secured a higher score than the previous year.

Likely contributors to the hike in outbound investment include the US being the largest market in the world and its improving economic performance. This has been heightened by the Trump administration and the new lower corporate tax rate, which has been reduced from 35 per cent to 21 per cent, and speculation that the Government’s protectionist actions are encouraging companies to invest in the US to maintain market access.

High-profile cross-border deals during H1 2018 evidence an increase in outbound investment for the US, such as the £35m acquisition of Montana-based Elite One to DCC Health and Beauty Solutions, and JD Sports’ acquisition of Indianapolis-based Finish Line for £392m.

Cross-border mega deals have also been prolific recently for the US, with British American Tobacco acquiring Reynolds American for $49.9bn, albeit this was in the latter half of 2017.

While mega deals for H1 2018 haven’t seen the same cross-border success, the US has remained dominant in this area domestically, namely with Cigna’s acquisition of Express Scripts for $67.9bn, and T-Mobile USA’s acquisition of Sprint for $58.9bn. Furthermore, with the Walt Disney/21st Century Fox deal in the pipeline for H2, this trend looks like it is set to continue.

Outbound investment is also expected to continue, again particularly in North West England, with Aziz Ul-Haq, partner in corporate finance at Deloitte stating, "With the recent corporate tax law reduction, the US has become increasingly attractive to North West businesses looking to employ an acquisitive global growth strategy.

It is therefore unsurprising to see deal volumes increase over the last six months, and with ongoing European uncertainty, this is a trend we would expect to see continue for the remainder of 2018.”

And, as the IMF has projected that the US economy will grow by 2.9 per cent in 2018, more than the 2.3 per cent in 2017, it is expected to remain a front runner for foreign investment.

US Outbound Deal Activity Portrait

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