Trump helps make cross-border M&A great again

Thu Mar 30, 2017 7:11pm EDT
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By Lauren Hirsch and Greg Roumeliotis

(Reuters) - Cross-border M&A had its strongest start since 2007, driving first-quarter global volumes up 7 percent, as optimism over U.S. President Donald Trump's economic agenda buoyed the stock market and the dollar, making foreign acquisitions cheaper than some U.S. targets.

Many U.S. CEOs are feeling richer and more confident thanks to a rally in their companies' stock. Yet potential U.S. acquisition targets often feel they are worth a lot too, while uncertainty over Trump's tax policies makes planning a merger more difficult for the companies involved.

To be sure, U.S. M&A was still up 3 percent in the first quarter. Some acquirers brushed off the political uncertainty, and often got around disagreements over the cash value of a company by using their stock as currency to pay for deals. Nonetheless, a few acquirers chose to cast their net overseas.

The biggest deal since the start of the year was U.S. healthcare and consumer conglomerate Johnson & Johnson's (JNJ.N: Quote) $30 billion agreement in January to acquire Swiss biotechnology firm Actelion Ltd (ATLN.S: Quote).

Other major cross-border deals were attempted unsuccessfully. Anglo-Dutch consumer goods giant Unilever Plc (ULVR.L: Quote) snubbed a $143 billion acquisition offer from U.S. food conglomerate Kraft Heinz Co (KHC.O: Quote), while Dutch paint maker Akzo Nobel NV (AKZO.AS: Quote) rejected a sweetened $24 billion bid from U.S. coatings manufacturer PPG Industries Inc (PPG.N: Quote).

Some cross-border M&A even headed in the other direction. British consumer products company Reckitt Benckiser Group Plc (RB.L: Quote), for example, agreed in February to acquire baby milk manufacture Mead Johnson Nutrition Company MJN.N for $17.9 billion.

"We saw an increase in outbound deals from the United States into Europe, as the outlook on the European economy has improved. Transactions for European targets are also less impacted by uncertainty around potential U.S. tax reform," said Gary Posternack, global head of mergers & acquisitions at Barclays Plc (BARC.L: Quote).

Preliminary Thomson Reuters data show that global M&A totaled $726.5 million in the first quarter, up 7 percent year-on-year. Cross-border M&A totaled $323.1 billion year-to-date, the highest level since 2007, accounting for 45 percent of total M&A activity so far this year.   Continued...

FIL PHOTO - U.S. President Donald Trump talks to journalists at the Oval Office of the White House after the AHCA health care bill was pulled before a vote in Washington, U.S. March 24, 2017. REUTERS/Carlos Barria/File Photo