DEALS-Global M&A at 4-year low on declines in Europe, rate concerns

Thu Jun 27, 2013 6:59pm EDT
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By Soyoung Kim and Olivia Oran

NEW YORK, June 27 (Reuters) - Mergers and acquisitions around the world slowed to their most sluggish pace since 2009 in the first half of 2013, Thomson Reuters data shows, as recession-hit European companies put the brakes on transactions and their healthier U.S. counterparts took a cautious approach amid market uncertainty.

Some U.S. companies took advantage of cheap financing and abundant cash to strike big deals early this year. More chief executive officers have recently taken a pause, though, partly because of worries that they might find themselves overpaying for assets if interest rates rise, which would likely pull stock markets lower.

Dealmakers say activity may slow down further in coming months. Outside the United States, confidence has yet to return in austerity-hit Europe, and many Asia-Pacific economies such as China have been slowing after years of blistering growth.

"Many people believe that the stock market has run up in a way that's unnatural, supported by the lack of yield in the fixed income market and government-supported low interest rates," said Paul Parker, head of global corporate finance and M&A at Barclays.

"If you believe that there's going to be a stock market correction, you'd need to be cautious about agreeing to a transaction in cash or largely in cash."

Global deal volume fell 9 percent to $978.8 billion in the first six months of the year, down from $1.07 trillion a year earlier. This was the weakest performance since the first half of 2009, when volumes totaled $900.8 billion, according to Thomson Reuters data as of June 25.

In Europe, volume fell 43 percent to a 16-year low of $221 billion, just 22.6 percent of global dealmaking, the data shows. Asia-Pacific volume declined 3 percent to $173.5 billion.

The U.S. market fared better. A handful of large deals, such as H.J. Heinz Co's $23.2 billion buyout and Comcast Corp's $16.7 billion purchase of General Electric Co's stake in NBC Universal, helped send volume up 34 percent to $437.4 billion, nearly 45 percent of global activity.   Continued...