Trump helps make cross border M&A great again

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Cross-border M&A had its strongest start since 2007, driving first-quarter global volumes up 7 percent, as optimism over U.S. President Donald Trump's economic agenda buoyed the stock market and the dollar, making foreign acquisitions cheaper than some U.S. targets. Many U.S. CEOs are feeling richer and more confident thanks to a rally in their companies' stock. Yet potential U.S. acquisition targets often feel they are worth a lot too, while uncertainty over Trump's tax policies makes planning a merger more difficult for the companies involved. To be sure, U.S. M&A was still up 3 percent in the first quarter. Some acquirers brushed off the political uncertainty, and often got around disagreements over the cash value of a company by using their stock as currency to pay for deals. Nonetheless, a few acquirers chose to cast their net overseas. The biggest deal since the start of the year was U.S. healthcare and consumer conglomerate Johnson & Johnson's (JNJ. N) $30 billion agreement in January to acquire Swiss biotechnology firm Actelion Ltd (ATLN. S). Other major cross-border deals were attempted unsuccessfully. Anglo-Dutch consumer goods giant Unilever Plc (ULVR. L) snubbed a $143 billion acquisition offer from U.S. food conglomerate Kraft Heinz Co (KHC. O), while Dutch paint maker Akzo Nobel NV (AKZO. AS) rejected a sweetened $24 billion bid from U.S. coatings manufacturer PPG Industries Inc (PPG. N). Some cross-border M&A even headed in the other direction. British consumer products company Reckitt Benckiser Group Plc (RB. L), for example, agreed in February to acquire baby milk manufacture Mead Johnson Nutrition Company (MJN. N) for $17.9 billion.

"We saw an increase in outbound deals from the United States into Europe, as the outlook on the European economy has improved. Transactions for European targets are also less impacted by uncertainty around potential U.S. tax reform," said Gary Posternack, global head of mergers & acquisitions at Barclays Plc (BARC. L). Preliminary Thomson Reuters data show that global M&A totaled $726.5 million in the first quarter, up 7 percent year-on-year. Cross-border M&A totaled $323.1 billion year-to-date, the highest level since 2007, accounting for 45 percent of total M&A activity so far this year. Acquisitions by U.S. companies abroad reached $114.1 billion so far in 2017, a triple-digit percentage increase compared with a year ago, surpassing the year-to-date record set in 2007 of $97.1 billion. Europe inbound cross-border M&A reached $127.1 billion, topping the year-to-date record of $104.5 billion set last year. In the United States, the biggest questions CEOs faced when considering M&A were around mulled policy reforms that would affect deductibility of interest expense, corporate tax rates, overseas cash repatriation, and the potential cross-border adjustment tax.

"There are a number of people who are saying I want to wait until this fleshes out a bit, until questions around tax or certain healthcare policies get reformed over time, it’s harder to do a deal," said Robin Rankin, co-head of global M&A at Credit Suisse Group AG (CSGN. S). Nevertheless, most M&A advisers appear optimistic. About 44 percent of dealmakers expected M&A to increase in 2017, an uptick from just 13 percent a year ago, according to a survey published this week by financial communications firm Brunswick Group. PRICE CONCERNS

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