Corporate dealmaking has imploded in 2016

demolition collapse implodeEthan Miller/Getty ImagesThe MGM Grand Hotel/Casino is seen behind the 16-story tower of the Boardwalk Hotel & Casino as it is imploded early May 9, 2006 in Las Vegas, Nevada

It’s been a miserable start to the year for corporate dealmakers.

Both initial public offerings and mergers and acquisitions fell sharply in the first quarter of 2016 to levels not seen since the last recession.

“For 2016 year-to-date (as of 16 March), global M&A activity fell 63% by deal value compared to 4Q15, whereas global IPO activity fell 82% by deal value,” according to EY’s latest quarterly global IPO report.

“By deal number, global M&A activity in 1Q16 fell 16% while global IPO activity fell by 52%.”

For IPOs this is “by far” the worst start to a year since 2009, according to the report; the number of M&A deals announced also tumbled to their lowest level in eight years.

Volatility from global markets to start the year was major reason for the corporate dealmaking slowdown, the report said.

“To some extent, the decline in activity in 1Q16 can be attributed to a ‘cooling off’ effect after several years of strong IPO activity across major markets,” the report said. “However, fears of a global economic slowdown, perceptions of high market valuations due to ultra-loose monetary policy and the current volatility in capital market conditions have all contributed to the muted start to the year.”

Screen Shot 2016 03 22 at 8.56.20 AMErnst and Young

In the US, the decline was even steeper than the global decline in market debuts with the value of IPOs in the first quarter dropping 88% from last year.

In the M&A marker, the same fears about a global slowdown seemed to weigh on activity, though the nature of these deals has proven the market to be a bit more resilient.

“Whereas M&A activity is less tied to specific dates, less publicly exposed, more flexible and has proved more resilient to equity market turbulence,” said the report. “Despite a softening on 2015’s stellar performance, M&A activity is currently faring better than the IPO market with less steep declines.”

And while these “less steep” declines are still pretty bad — again, this is the worst year for merger activity in eight years — EY does see the possibility of an uptick in the months to come.

On Monday, three multi-billion dollar mergers were announced.

Click to comment

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Most Popular

To Top