Uncertainty Contributes to a Slowdown in Mergers and Acquisitions

Leslie Picker reported in Friday’s New York Times that, “Uncertainty is often a deal breaker.

It can be largely blamed for a string of declines in acquisitions announced during the first half of the year in almost every sector, location and size compared with the same period in 2015. Many executives were hesitant to pull the trigger.

“About $1.6 trillion worth of deals were announced this year through Thursday, according to data compiled by Thomson Reuters. That represented a 19 percent slump from the first half of the year in 2015 and a slight increase from the same period in 2014. The number of deals — 21,086 — represented an almost 5 percent decline, indicating that the transactions are smaller.”

Ms. Picker added that, “Mergers and acquisitions bankers and lawyers have attributed the slowdown to concerns about mergers being blocked by antitrust regulators after some prominent deals fell apart for that reason. There is added pressure because any deal that is signed now will have to gain regulatory approval under a new administration, and the outcome of the presidential election is far from certain.

“Then, of course, there is the multitude of unknowns surrounding Britain’s unexpected vote to leave the European Union.”

The Times article noted that, “Britain’s referendum caught many mergers and acquisitions professionals by surprise. A survey by Intralinks published on June 17 showed that 80 percent of deal makers did not believe Britain would leave the E.U. About two-thirds of those surveyed believed that Britain’s departure would have a negative impact on merger activity throughout Europe.”

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