Global and European M&A deal volumes fell to their lowest levels for three years during the third quarter of 2016, following Britain’s vote to leave the European Union this June.
Mergermarket data shows that 3,595 global deals were announced during Q3, the lowest quarterly figure since the second quarter of 2013 (3,546), and the worst Q3 since since 2012, when 3,296 deals were announced.
Global deal volume fell by more than 20 percent on Q3 last year, when 4,501 transactions were announced. Meanwhile, the European market saw 1,323 deals during Q3 – the lowest figure since Q3 2012 (1,271).
Total deal values were also affected, with $8.13 trillion worth of global deals announced – 15 percent down on the same period last year, when total deal values stood at $9.58 trillion.
Allen & Overy corporate co-head Richard Browne believes Brexit had a tangible effect on the M&A market. “The most recent quarter has been much quieter than the first half of this year and much quieter than Q3 in the previous two years. That’s unsurprising, most obviously because of Brexit,” he said. “The run-up to the vote created uncertainty and then there was shock at the outcome. Most wanting to do transactions took time over the summer to absorb what it meant.”
Bob Bishop, international head of corporate at DLA Piper – which topped the Q1-Q3 global rankings by volume, acting on 317 deals – agrees that Brexit impacted on the markets, but believes things are now improving.
“The market has had to cope with significant uncertainty over the first three quarters, most obviously as a result of Brexit,” he said. “That said, despite the significant slowdown from June to mid-August, activity levels seem to be picking up. In the UK, the immediate sense of crisis has abated.”
White & Case leads the global value rankings, after acting on 224 deals during the first nine months of the year, totaling $421.7 billion. The U.S. firm has been involved in seven of the 10 biggest deals of the year so far, including advising Credit Suisse as financial adviser to ChemChina on its $46 billion takeover of Syngenta.
White & Case global head of M&A John Reiss has a brighter outlook on the impact of Brexit. “After Brexit, commentators struck the death knell for M&A. It has had some impact, particularly on certain industries in the U.K., but its impact is, and will be, limited,” he said. “M&A is a strategic imperative and won’t stop because of Brexit. We have had two and a half years of enormous activity and I do believe the third quarter slowdown was simply the M&A market taking a collective breather.”
Freshfields Bruckhaus Deringer is the top-ranked U.K. firm in the global rankings, coming in at seventh after advising on 155 deals worth a total of $243.5 billion, a performance that ensured the firm also came out on top of the European and U.K. value rankings.
The magic circle firm’s London corporate head Simon Marchant also believes the markets will adjust to a post-Brexit world.
“What we saw during the aftermath of the financial crisis was that the market and clients can absorb quite a lot of uncertainty and nevertheless get on with their business,” he said. “I think it will be the same with the process around Brexit. Companies will learn to work around it and do what is best for their business. It’s not a binary issue – they don’t have to do lots of M&A or none. We have to recalibrate ourselves to the world we live in.”