The number of cross-border M&A deals is expected to decline globally this year amid regulatory hurdles driven by rising protectionism, Willis Towers Watson PLC said Jan. 9.
Mega-deals — those valued at more than $10 billion — will be hit in particular by global political uncertainty, from trade wars to Brexit, said Jana Mercereau, Willis Towers Watson's head of corporate M&A for Great Britain.
"Political and economic uncertainty remain, impacting large cross-border deals and inevitably leading to some degree of volatility in terms of volume, but deal activity will prevail," Mercereau said.
Chinese companies' M&A activity is projected to be muted in 2019, affecting volumes in the wider Asia-Pacific region, where deal volume dropped significantly in 2018.
In the U.K., foreign M&A activity is expected to slip due to Brexit uncertainty. However, the U.K. is expected to remain among the top target nations of foreign buyers, according to the research, which involved conducting analysis from the perspective of the acquirer.
Meanwhile, U.S. acquirers are expected to focus on domestic targets, resulting in stable deal volumes in the local market this year.
According to Willis Towers Watson, global deal makers recorded their worst annual performance in 2018 in terms of delivering shareholder value since 2008, with rising regulatory and trade uncertainty making it "ever more challenging" to deliver deals successfully in 2019, Mercereau said.
However, Mercereau added that there is "a realistic chance that deal makers will do better" in 2019, as long as they pick their targets for growth.
"Although complex headwinds remain, we are optimistic that the market will bottom out in 2019 and, supported by more clarity over the direction of the U.S. administration and Brexit, improve the position of buyers in achieving better value from their deals."