JEDDAH — As dealmakers adjust to a challenging M&A climate, they have reason to be positive, with cross-border deal value jumping 49% year on year while the Index is up 30 points on Q2 2016, , Baker McKenzie Cross Border M&A Index for Q2 2017 revealed.

Global dealmakers faced a range of political challenges in Q2. The nature of the UK’s exit from the EU is still unclear following a snap election which delivered more uncertainty. A cloud of doubt hangs

over President Trump’s ability to pass his pro-business agenda through Congress. In spite of this political volatility, M&A has remained stable.

There were a total of 1,368 cross-border deals valued at $345.8bn announced during Q2, down a mere 1% by value compared to the previous quarter but up 15% year on year.

The EU proved a draw for cross-border dealmaking despite political volatility. The largest cross-border deal of the quarter saw US-based Praxair purchase Germany’s industrial gas firm Linde for $45.5bn.

The deal pushed chemicals and materials into the top value slot for the quarter with $60.4bn. Industrials led the way in terms of volume with 209 announced deals. This was despite the sector taking seventh

place on the value table with $25.4bn, highlighting a flurry of midmarket activity. However, there was a quarter-on-quarter drop of 10% in volume and, as a consequence, Baker McKenzie’s Cross-Border M&A Index, which tracks quarterly deal activity using a baseline score of 100, slipped to 233 in the first quarter of the year. This marks a 4% decrease on the previous quarter. As a result of the drop in volume but considerable rise in value, the cross-border deal average rose to $477m in Q2—up 63% year on year.

For this quarter, it would appear that the increased risk and uncertainty facing cross-border transactions has led dealmakers to choose to invest more money in a smaller number of handpicked deals.

The cross-border market has held strong in Q2 against a range of challenges. Uncertainty surrounding Brexit, European elections and President Trump’s future policies are weighing heavy on dealmakers’ minds. Cross-border dealmaking retained its dominance against this volatile backdrop, accounting for almost half (47%) of global value and 36% of volume.

Driven by activity within the EU, cross-regional dealmaking was up 60% year on year.

In the Midle East, the UAE has emerged as a purposeful investor overseas having secured two of the top ten cross-border deals of Q2. The largest

outbound deal from the Middle East saw the Abu Dhabi Investment Authority partner with Singaporean sovereign wealth fund GIC to buy US firm Pharmaceutical Product Development for $9bn.

These outbound deals helped the overall Middle East cross-regional deal total rise by 167% quarter on quarter from $6.8bn in Q1 to $18.2bn in Q2. It is clear that the UAE has become a powerful force within the global cross-border deal market.

As the region gains relative stability in the wake of a fractious Brexit vote and a spate of regional elections, the EU has become a hub for M&A. It accounted for 41% of cross-regional volume and 58% of value,

with 321 deals totaling $138bn.

North America was the major bidder into the EU, spending $97.2bn on deals in Q2. Despite an upcoming election, Germany was the most targeted country in the EU and attracted the highest valued cross-border deal of the quarter globally – US Praxair’s $45.5bn purchase of industrial gas firm Linde.

In terms of total cross-border M&A, the EU accounted for 46% of cross-border deal volume and 56% of value. Highlighting the region’s dominance in the global dealmaking scene, seven of the most targeted countries in Q2 by value were from the EU. This compares with only four in Q1 2017.

Following a challenging first quarter where strict government legislation caused a sharp drop in overseas deals, Chinese investors have returned to the deal table. China was the second most acquisitive crossborder

nation in Q2 with 94 deals valued at $35.9bn compared with 74 deals valued at just $11.5bn in Q1.

Meanwhile, Japan continues its outbound buying spree. The country carried out 66 deals valued at $18.6bn in the second quarter compared to 63 deals at $14.7bn in

Q1. Many of the largest deals were focused on the technology arena and involved Softbank, which bought stakes in Chinese, Indian and UK tech companies in Q2. — SG