Firms have become more optimistic about striking heavyweight deals despite political uncertainty creating a tougher landscape for cross border tie-ups, according to a report.
Company boards were increasingly buoyant about mergers and acquisitions (M&A) opportunities in the first quarter of 2017, while others primed their defence strategies in anticipation of unwanted approaches, the Freshfields M&A monitor said.
However, the study found that geopolitical uncertainty, fuelled by Brexit, elections in the eurozone and US President Donald Trump, was posing a “significant barrier” to deal progression.
The comments came as it revealed that global M&A value hit 786 billion US dollars (£630 billion) in the first three months of 2017 following 10,204 deals.
The value of European regional M&A reached 204 billion US dollars (£164 billion) over the period, with 2,828 transactions.
The £11 billion proposed tie-up between Aberdeen Asset Management and Standard Life emerged as Europe’s third biggest deal.
“Transformational M&A is a boardroom topic – many boards are optimistic about opportunities that may come their way while others, sensing unsolicited approaches, are revisiting their defence strategies,” the report said.
“We are in a period where geopolitical conditions may prove a significant barrier to deal progression, as we have seen on a number of transactions globally.
“We are seeing an increase in the length of time to complete cross-border deals, which reflects this reasoning . ”
Durex owner Reckitt Benckiser unveiled the second biggest global deal in the first quarter when it made a 16.6 billion US dollars (£13.2 billion) swoop for US baby formula maker Mead Johnson.
However, European regulators killed off the London Stock Exchange Group’s (LSE) £24 billion merger with Deutsche Borse at the end of last month, saying the deal would have forged a “de facto monopoly”.
The European Commission said the two exchanges had failed to address its competition concerns, while analysts previously cited Brexit as a potential barrier.
It came after US food giant Kraft Heinz scrapped its £115 billion bid for Unilever in February.
The proposed tie-up was expected to meet strong political opposition, with Prime Minister Theresa May said to have asked officials to look at the deal before it was abandoned.
Focussing on the UK market, Bruce Embley, co-head of global M&A at Freshfields, said : “I think the situation we have seen with asset management will continue as regulatory terms are making it more attractive to consolidate.
“Anything with a technology angle is also being taken very seriously, while industrials has had a very strong 12 months and I see no reason why that will not carry on.
“There is a question mark as to whether the UK will become more political over certain M&A deals, but I don’t think it will,” he added.