US-China trade war greater threat to M&A deals than Brexit, survey finds

The trade war between the US and China is a greater risk to merger and acquisition (M&A) activity this year than Brexit, according to research published today.

A total of 50 per cent of senior global M&A professionals viewed the trade tensions, rising tariffs and potential subsequent erosion of global GDP as the biggest emerging business risk in 2019, a poll by Merrill Corporation revealed.

Read more: Markets lift as US-China trade talks reach conclusion

Only ten per cent of those surveyed said that Brexit was a rising concern despite the ongoing uncertainty surrounding the UK’s future relationship with the EU as the March 29 deadline day draws closer.

Merrill Corporation chief executive Rusty Wiley said: “Despite a marked wave of protectionism, many companies want access to China.

“However, there is a concern about the corporate cost of doing business in China, especially as regulations including transactions involving foreign investment in the US have evolved to include companies with five per cent foreign ownership.

The next round of trade talks between the US and China are due to begin tomorrow when Chinese vice premier Liu He visits Washington. 

Regionally, Asia was the most concerned about the impact of a US-China trade war on future deals, with 70 per cent of M&A professionals citing it as the most concerning risk, followed by 54 per cent in the Americas and 34 per cent in Europe.

Most respondents said that national security and competition regulations will be the primary factor in sinking deals this year and a total of 40 per cent thought the introduction of GDPR could kill M&A deals.

Meanwhile, climate change was only a major concern for 12 per cent of those surveyed.

Read more: Markets rally as Trump claims US and China are discussing possible trade agreement

Overall the poll presented a positive forecast for M&A activity over the course of 2019, with 86 per cent of respondents agreeing that the market was heading in a positive-to-neutral direction this year, while 14 per cent predicted a negative outlook.

Wiley added: “There is still a great deal of cash in play, particularly with private equity. At the same time, dealmakers will be taking an extra look at how crossing borders and leveraging foreign partners will impact the entire M&A life cycle.”