Baker & McKenzie's quarterly cross-border M&A index, released later this week, reports that cross-border M&A has accelerated in the first quarter by eight per cent year on year, with 1,147 deals worth $307.1bn (£215.2bn) announced as of end of March.
Cross-border M&A made up 50 per cent of all deal value, well ahead of the 39 per cent level seen in 2015 and 43 per cent in 2014.
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The report recorded 225 UK inbound and outbound deals worth more than $48bn, down from 278 worth $60bn in the same period in 2015.
An author of the report, Baker & McKenzie partner Nick O'Donnell, told City A.M. that while January was a quiet month, the market picked up in February and March. And he predicted that the M&A market in the UK and beyond will continue to be fuelled by China.
Baker & McKenzie said that the first quarter of this year was expected to be slowed by dealmakers who “took pause... in light of macro noise from volatile equity markets, uncertainty over Brexit, Chinese growth potential and political developments in the EU”.
The M&A optimism has been echoed by Goldman Sachs. Chief executive Lloyd Blankfein told shareholders in a letter that, after a “robust” 2015, “volumes as a percentage of market capitalisation are still below prior-cycle peak levels”.
He added: “We see this as a sign that there is still some room to run for M&A activity, particularly when equity markets show signs of sustained stabilisation.”
Speaking to City A.M., O'Donnell emphasised the M&A growth expected from China, which is now “being perceived as much more credible” by Western companies.
He said: “Chinese outbound had been quite underdeveloped given the size of the economy. There has been this massive overhang of deals coming out of China and now they’re starting to punch their actual weight.
“They have the resources to still do these deals. So some weakening of the economy - I don’t think it negatively impacts on that. You could argue that it would drive those companies to be more ambitious globally because of the weakening within the country.”