The market sell-off triggered by fears that the US-China trade truce could unravel has created fresh uncertainty for companies on the hunt for acquisitions, threatening a five-year global takeover wave, dealmakers say.
Jumping volatility creates several problems for advisers who have helped broker more than $18tn of deals since the start of 2014. Swinging share prices can spoil a deal, as buyers and sellers struggle to agree on a value to clinch a transaction, and can also weigh on board and chief executive confidence. If an economic slowdown materialises, as some market barometers suggest, M&A activity would suffer.
“There is no direct impact on transactions, however, the uncertainty that the trade war and the potential for escalation of the trade war has on the economy has created uncertainty,” said Frank Aquila, a corporate lawyer at Sullivan & Cromwell. “And uncertainty ultimately is what kills all deals.”