New York (Reuters)-Executives of Investment Banks and CEOs braked mergers and acquisitions after US President Donald Trump starts a global trade war on April 2, with fewer agreements being signed than during the darkest days of the Covid-19 pandemic and the 2008 global financial crisis.
The number of mergers and acquisition contracts (M&A) signed worldwide – an indicator of global economic health – fell in April to the lowest level in 20 years, or since February 2005, according to data compiled by Dealogic for Reuters.
In the US, the world’s largest mergers and acquisition market, only 555 agreements were signed last month, the smallest for any month since May 2009.
Trump’s self -titled “Liberation Day”, when he announced tariffs against several countries, caused global markets to fall, that CEOs from Chime to Stubhub canceled planned IPOS and other nations to take retaliatory measures.
Uncertainty has also led executives from investment banks that gain fees and bonuses by intermediating M&S and IPOS, telling customers to postpone mergers and initial action and offers of action until there is more clarity and consistency in US policy.
“I advise customers to wait,” said Lorenzo Paoletti, Managing Director of Investment Bank of Truist Securities. “CEOs and CFOs have not yet fully understood how tariffs will affect them, so it is better to keep cash in cash” until there is more clarity.
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Some large businesses in April, including the acquisition of a Global Payments card and account processing company for $ 24.25 billion, helped boost a dying second trimester start in what was expected to be a star year for mergers and acquisitions.
However, this was not sufficient to prevent the value of global fusions and acquisitions from falling to $ 243 billion – about 54% below March and 20% below the monthly average of the last 20 years, show Dealogic data.
“We are seeing a chain reaction in all the due diligence we are doing,” said Kristin Pothier, strategy leader and global business consulting at KPMG consultancy.
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The retaliatory trade war caused the market volatility to reach historical levels in April, “driven by intermittent statements from the White House on tariff politics,” said Morgan Stanley analyst Lisa Shalett.
On April 2, Trump imposed and then suspended a minimum rate of 10% for 90 days on all US imports, and higher percentages for dozens of important partners, from Europe to Japan, including rates on China that totaled 145%.
Trump’s threats from firing the Federal Reserve’s Chair, Jerome Powell, who filed the Fed’s political independence, further exacerbated stress in the markets, Shalett said.
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There was a positive point for mergers and acquisitions last month: technology businesses where the value is more on intellectual property, such as algorithms and software, than in physical goods subject to tariffs such as cars.
The technology sector was responsible for almost 40% of nearly $ 600 billion in business signed this year in the US. The country is responsible for almost half of the global business activity in value.
Uncertainty has affected the sectors differently.
Telecommunications, media, services, oil and gas and public utility services are sectors less affected by tariffs, while some areas of industry, health and technology are facing greater changes in their business models due to tariff ads, said Kevin Cox, Citi’s global head chief.
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“Any manufacturer, whether it receives inputs from abroad or sending finished products abroad, will be affected,” said Cox.
Your team is telling customers to devote time to understanding the additional risks of a target’s business model and their expected returns.
Banco advised Boeing on the sale on April 22 of the Jeppepes Flight Software subsidiary to Thoma Bravo for $ 10.6 billion, which was considered a technology agreement.
“Volatility impacts transactions,” Cox said. “Buyers should pricle this additional risk or back down and wait for the situation to be known.”
