The M&A party is almost over

published 6 January 2017

Last year turned out to be the second-best for global mergers and acquisitions (M&A) since 2007. The total volume of M&A for 2016 was $3.6trn, a 17% drop from 2015's record $4.37trn.

The US accounts for around half of dealmaking, and there the outlook is auspicious. President-elect Donald Trump is hoping to encourage US firms to bring back some of the money they have stockpiled overseas to avoid taxes. If his tweak to the tax code works, much of the money seems likely to be spent on acquisitions. And "apart from available funds, the other big driver of M&A is CEO confidence", says Brooke Sutherland on Bloomberg.com. The Trump-induced rally thus bodes well.

Still, valuations are getting pricier, and the prospect of rising US interest rates may temper enthusiasm given how much of the M&A boom has been based on rock-bottom borrowing costs, making it cheap to borrow to snap up rivals. The broader problem is that the equity rally could rapidly reverse if Trump opts for protectionism or if the euro crisis returns. The M&A party "isn't over", reckons Sutherland, "but it's getting long in the tooth".

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Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.