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Global cross-border M&As rise 136%. What’s the outlook?

November 2015

November 18, 2015 | 09:50 | Geneva

Cross-border merger and acquisition (M&A) activity increased significantly in the first half of 2015, but may be slowing down in the second half of the year. The value of cross-border M&A purchases, an indicator of outward FDI flows, rose to $441 billion, a 136% increase over the same period of 2014, the latest edition of UNCTAD’s Global Investment Trends Monitor says.

Multinational enterprises (MNEs) from developed countries were the principal drivers of the global cross-border M&A trend. European MNEs, after a number of years of high divestment levels, registered a sharp rise in the value of acquisitions in 2015.

Cross-border M&As carried out by MNEs from North America continued to grow strongly (up more than 100%). Acquisitions by Canadian MNEs reached their highest half-year level. Tax inversions accounted for half of outbound deals by value from the United States, although they represented a small share (10%) of global cross-border M&A purchases.

After emerging as the largest investing region in the world for the first time in 2014, cross-border M&As by firms from developing Asia registered a decline this year (-27%). Activity by MNEs from Latin America and the Caribbean, as well as from Africa also decreased, reflecting the consequences of depreciating domestic currencies and falling commodity prices. The growth of cross-border M&A purchases is projected to slow in the second half of 2015, but the full year value will still be well above that of 2014, based on preliminary data for the first ten months of the year, the report said. A number of economic, financial and structural factors suggest that cross-border M&As will continue to grow in value in the coming years, although at a slower pace. Cross-border M&As are an attractive way to secure higher revenues when faced with slower organic growth, especially as emerging markets slow and developed countries register only modest growth. This tendency is likely to be bolstered by MNEs’ cash-holding which remain at record levels.

 

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