US inbound M&A value surges by 21% in Q1 2017

Megadeals from the UK and Japan help the US kick off the year in style

US dealmakers, both as sellers and bidders, have had an encouraging start to the M&A year. Deal value targeting the US (including domestic deals) was up by 21% year on year – from US$251.3 billion in Q1 2016 to US$303.1 billion in the first quarter of this year. The boost from megadeals meant that value rose even as the number of deals fell by 8% year on year.

Inbound deals contributed heavily to the value increase, with two UK acquirers leading the way. The biggest deal of the quarter saw UK-based British American Tobacco agree in January to acquire the 57.8% of its US rival Reynolds American that it doesn’t already own in a deal valued at US$60.7 billion. This was followed a month later by UK consumer giant Reckitt Benckiser announcing a US$17.8 billion deal for US baby formula producer Mead Johnson. These two deals ensured that consumer was the top sector for Q1

There were also notable deals from Japan, which contributed more than US$10 billion to the US inbound M&A market in Q1. Almost half of this was made up by Takeda Pharmaceutical’s US$4.9 billion deal for US biotechnology company Ariad. 

China was notable for its relative absence from deal tables. Perhaps reflecting stricter regulation on outbound M&A – and uncertainty about the Trump administration’s attitude toward China in general and CFIUS in particular – inbound deal value from China declined 86% compared with Q1 2016. (For a detailed discussion of the long-term outlook for Chinese outbound M&A, see our recent report China’s rise in global M&A: Here to stay.) 

As buyers, US companies pushed M&A value to US$256 billion – a 31% increase on Q1 2016. Outbound deal-making saw an even more pronounced jump of 44%, as outbound value rose from US$64.5 billion in 2016 to US$93.3 billion this year. The largest cross-border deal of the quarter saw US consumer giant Johnson & Johnson agree to buy Swiss biotechnology company Actelion for US$29.6 billion.

For the time being at least, it seems that global volatility and China’s sudden disappearance from the negotiating table haven’t dampened desire for US deals.

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