Dealmaking Declines Despite China’s Record Overseas Buying

Following a record-breaking year for worldwide mergers and acquisitions, dealmaking declined to a two-year low in the first quarter of 2016.

Chinese companies made record purchases abroad in the first three months of this year, yet Anbang Insurance in March walked away from a $14 billion bid for Starwood Hotels & Resorts. A number of other big mergers have fallen apart recently as well, including Canadian Pacific’s $27 billion bid for US railway Norfolk Southern. The US Treasury’s crackdown on tax inversions could also dampen M&A activity in the pharmaceutical industry.

“Weakness in the mid-market and some key sectors is dragging down the momentum seen over the past two years,” Thomson Reuters says. Worldwide, deals of more than $5 billion declined by 24% in the first quarter year-on-year. In the US, M&A activity was down 38%. According to Mergermarket, the megadeal frenzy that started in 2014 is winding down as companies look toward less-sizable deals.

Fitch Ratings notes that a large number of deals were delayed in the first quarter owing to challenging market conditions, contributing to what is expected to be weaker overall investment banking results.

State-owned China National Chemical’s $43 billion bid for Swiss agrochemicals maker Syngenta was the largest deal to take place in the first quarter.