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Macro uncertainty tempers global M&A

Following last year's frenzy, global M&A activity in the first half of 2016 has plunged.

Following last year's frenzy, global M&A activity in the first half of 2016 has dropped by a quarter to $1.33tn. Already, overall deal value in the UK is down by 70% aided by the uncertainty surrounding the UK's vote to leave the EU.

Despite Brexit, global deal making is expected to return to a steadier pace after the summer, supported by the ongoing consolidation in the global Chemicals and US Utilities sector and the continued flight to quality from Chinese investors. 

And, should the pound continue to weaken, there could be an uptick in inbound acquisitions as overseas buyers look to take advantage of cheaper assets. So far this year, US outbound activity into the UK fell by a quarter in H1 2016 versus H1 2015, and by more than half between the first quarter ($13.8bn) and the second ($6.7bn).

The UK aside, however, European M&A has done more than resist the global slowdown. European M&A value (excluding the United Kingdom) is up 19% to $284.2bn compared to last year. So while UK M&A activity recorded its lowest value since 2010 in 1H16 ($58.2bn), Germany recorded $30.3bn worth of deals and almost twice as much outbound M&A in 1H15 ($51.4bn) than for the whole of last year ($27bn).

US M&A activity in the first half of 2016 totaled $562.7bn across 2,242 transactions, a 31.5% drop in value and a decrease in volume by 342 transactions from 1H15. 

The run-up to the US presidential elections in November and market volatility are likely to further impair mega deals (above U$10bn) in the coming months. Only 14 have been announced so far this year, the lowest number since the end of 2013. This instability will also make deals completion more uncertain and could boost lapsed deals value to new highs. Already this year, there has been a large increase in the number of lapsed deals - 156 deals valued at $403.5bn have failed to complete.

This article is editted from Mergermarket's H1 2016 Global M&A Trend Report. 

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