The economic and geopolitical uncertainties did have an impact on global M&A activity that ebbed slightly. However, dealmakers continued to show resilience with North America accounting for more than 50% of global M&A on our platform.
Global M&A deal activity witnessed a drop in 2019 owing to economic and geopolitical uncertainties that curbed the risk appetite of companies. As we look back into 2019, we drilled down into our data to analyze region-wise M&A deal activity in the middle market.
For our year-end Top Sector of 2019 analysis read our latest blog.
North American mid-market activity showed resiliency amid the global M&A slowdown and took the lion’s share of the overall M&A deal activity on our platform at 61%.
Low interest rates, robust equity markets, cheap debt financing conditions, and low unemployment helped maintain a conducive environment, even as deal makers were concerned about the uncertainties around geopolitical issues like trade wars. The region observed high domestic as well as cross-border deal activity. We saw an upswing in both US and Canada, with TMT sector driving significant investments. Despite being conservative about foreign trade US showed a great appetite for deals, a trend that is expected to continue this year. Latin America also showed positive signs owing to high deal activity in Brazil.
Europe accounted for 17% of M&A deals on our platform. The deal activity was adversely impacted by several factors including uncertainties around Brexit, Germany’s economic slowdown, trade issues with US, and increased regulatory scrutiny.
Activity in the United Kingdom saw an uptick with companies becoming cheaper acquisition targets as buyers seemed to lose confidence in light of Brexit. Overall activity in Europe should get back to its normal pace once there is more clarity on Brexit and European economies stabilize. However, given the heightened geopolitical and economic uncertainties the downturn in deal activity might continue this year as well, with both strategic and financial buyers showing poor buyers confidence.
US-China trade dispute, increased scrutiny by the Chinese government, pro-democracy protests, all together hit deal activity in the region and cross-border activity in particular. Asia Pacific accounted for 15% of deal activity on our platform driven by Vietnam, Malaysia, and Singapore that can be attributed to the impact of trade wars on South East Asian supply chains. India and South Korea were bright spots too.
China’s and Hong Kong’s share in the overall deal activity shrunk owing to geopolitical uncertainties and increased scrutiny of the Chinese government on outward investment by private firms.
What’s in for 2020?
The question that lingers is, what challenges will deal sourcing industry experience in 2020 or will the macro-environment become conducive?
We believe the following factors should promote M&A activity in 2020 – strong capital positions, high liquidity, low interest rates, and correction in buyer and seller price expectations. A slowing economy can make M&A attractive as acquirers see an opportunity for higher returns and more growth.
Also, as discussed in our previous blog, we expect digital transformation across all sectors and geographies to continued driving M&A deal activity in the near future.
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