Megadeals boost value in Q2 but uncertainty causes deal volume to slide

Despite a slight dip in value for the quarter, deal value is up year-to-date, compared to H1 2016

After a steady first quarter, global M&A dipped in Q2 against a backdrop of ongoing political and macroeconomic uncertainty. Volume fell from 4,304 deals in Q1 2017 to 3,683 deals in Q2—the lowest quarterly volume since Q2 2013. Meanwhile, a Q2 value of US$715 billion saw a 4.4 percent decrease compared to the same period last year.

However, more positively, H1 deal value increased 6.5 percent year on year, on the back of a number of megadeals, although deal volume dropped from 9,133 to 7,987. And PE activity boomed, with the value of buyout deals up 75 percent compared to Q1.

The challenges global dealmakers faced in Q1 remain unresolved as the summer progresses. The nature of the UK’s exit from the EU is still unclear despite the triggering of Article 50 and a snap election which failed to bring with it political stability. The stock market remains high—uncomfortably high, to some. President Trump’s pro-business agenda is looking somewhat problematic. And Chinese government scrutiny of overseas deals continues to worry buyers and sellers alike.  

Nevertheless, at the top end of the market, dealmakers continue to show their confidence. The total value of megadeals announced in Q2 was US$256 billion—this represents a 20 percent increase compared to the same period in 2016. Among these were headline deals such as Amazon’s move into the grocery business—the tech giant announced a US$13.5 billion takeover of high-end supermarket chain Whole Foods.

Industrials and chemicals was the top-performing sector by both value and volume in Q2. Deal value was bolstered by the largest deal of the quarter—the US$45.5 billion merger between Praxair and Linde announced in June, the latest in a wave of consolidations sweeping across the sector.

We hope that a summer without any major surprises will lead to a busy fall for M&A activity, consistent with the high volume of activity in the last quarter of 2016.

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