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2016 was the second-best year for dealmakers since the financial crisis — but that momentum appears to be slowing.
Mergers and acquisitions in the US fell 21 per cent in February from a year earlier to 834 deal announcements and were down 24.7 per cent from the previous month, when 1,107 deals were announced, according to data provider FactSet.
Meanwhile, aggregate spending fell nearly 3 per cent year-on- year in February to $115.6bn but climbed 9.2 per cent from the previous month.
That brought the number of announcements over Jan-Feb this year down to 1,961, from 2,225 in the same period last year. However, over the same period, aggregate spending edged higher to $221.4bn, from $218.6bn.
Reckitt Benckiser Group’s merger agreement to acquire Mead Johnson Nutrition for $16.5bn was the biggest to be announced. Meanwhile, Morgan Stanley was the top adviser with 26 deals for a transaction value of $75bn. JPMorgan Chase trailed with 22 deals and a transaction value of $50.06bn landing it in the runner-up spot.
The report also showed that private equity activity in the US was down 25.2 per cent to 80 deals in February from the previous month, though the aggregate transaction value had climbed by nearly 52 per cent to $24.4bn over the same period.
Uncertainty around Donald Trump’s presidency and the possible changes in healthcare and tax reform has tempered deal activity.
Looking ahead some have also cautioned the appetite for M&A could be curbed as companies could lose access to cheaper financing as the Federal Reserve begins to raise rates. But rating agency Moody’s has said that, while the Fed could raise rates even a half-percentage point cumulative increase would leave rates well below historic norms and the Fed itself has indicated that rate rises will be gradual.