Geographical breakdown of cross-border M&A favors developed markets

The geographical breakdown of cross-border M&A flows continues to suggest that developed markets (DM) remain the most significant driver for M&A activity.

Since the start of the year, Europe (which includes non-Euro Area European economies) has been the most popular hub for cross-border M&A activity, followed by North America and then Asia Pacific. 

The bulk of these deals have taken place between North America and Europe and the trend of North American corporate interest for European acquisitions is once again evident. 

European corporates by contract continue to have a preference for deals closer to home.

Though Europe remains the number one destination for European acquisitions, it is worthy to note that compared to the same time last year, North American acquisitions of European corporates have risen markedly.

And at the same time, European houses have increased activities in North America.

This trend may beworth focusing on in the future against the backdrop of the ECB QE program.

The cash component part of cross-border M&A deals since the start of the year has remained very high (85%). 

Bank of America Merrill Lynch notes..

• The evidence of persistence on FX markets following the announcement of a crossborder M&A deal is patchy, at best. This would be consistent with the breakdown of the cross-border M&A flows since the start of the year, where the vast majority of announced acquisitions have been below $500mn. 
  
  
• With the bulk of cross-border M&A deal announcements at below $500mn, the immediate impact on FX markets is limited. 
  
  
• This is confirmed by our own analysis of the impact post announcements on the major currencies where M&A activity has been traditionally large (USD, GBP, EUR). 
  
  
• GBP/USD is probably the most sensitive to announcement news due largely to the fact that deals involving theUS and UK have fallen into the "mega-deal" category