Merger activity trumped by Brexit uncertainty and US election repercussions
Economic uncertainty sparked by the Brexit vote and the US election caused a "significant" slowdown in global merger and acquisition (M&A) activity in the final months of 2016, research shows.
The number of deals closed over the fourth quarter fell to 201 compared to 307 over the same period last year, with only five acquisitions completed by UK firms, versus 16 in the final months of 2015.
Willis Towers Watson's latest Quarterly Deal Performance Monitor, conducted in partnership with the Cass Business School, shows that an additional 40 deals could still be completed by year-end worldwide, but that would still leave volumes lagging behind last year's levels.
Jana Mercereau, Willis Towers Watson's head of corporate M&A for Great Britain, said: "The results suggest that despite globally low interest rates acting as an incentive for companies to raise capital to undertake M&A activity, the economic uncertainty post Brexit and pre-US election has caused companies to wait and see before they embark on new activity."
The total number of completed UK acquisitions fell by two thirds, but included Ladbrokes' merger with Gala Coral Group for £2.3 billion, JD Sports Fashion's takeover of Go Outdoors for £112.3 million, and Informa's acquisition of Penton Media for £1.26 billion.
The report only considered completed M&A deals worth at least 100 million US dollars (£80.8 million).
On a regional basis, North American companies were the most active acquirers, closing 84 deals, but that was still lower than 133 in the fourth quarter of 2015.
Acquiring companies in Asia-Pacific closed 78 deals, marking a decline from 114 over the same period last year.
European companies snapped up 29 firms, compared to 53 in the final months of 2015.
The report found that M&A activity was most subdued in sectors including consumer products, financial services, healthcare, materials and telecoms, with large, domestic, intra-regional and cross-sector deals all down globally in the fourth quarter.
Ms Mercereau said: "This quarter has seen a natural slowdown, the third quarter saw a greater volume of deals completed suggesting that companies pushed through deals taking advantage of lower interest rates and before the predicted turbulence of the US election.
"However we need to be wary of taking one quarter's results and forming a trend. We have entered a period of great economic uncertainty it is natural that organisations are being more cautious."