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Tuesday, 2 August 2022

Global M&A isn’t in Kansas anymore

Global M&A activity has slowed dramatically this year: The value of global M&A transactions has fallen almost a third so far this year as the conditions that enabled an explosion of dealmaking in 2020 and 2021 go into reverse. Mergers worth USD 2.4 tn had been announced globally as of late July, down 30% from the same period in 2021, according to Dealogic data cited by the Wall Street Journal.

The culprits: Rising interest rates, soaring inflation and economic uncertainty fuelled by the war in the Ukraine are all putting a damper on activity. This comes after a booming year for M&A activity, where loose monetary conditions spurred a buying spree that saw mergers worth almost USD 6 tn.

It’s not looking good for 2H 2022 either: “Uncertainty is never helpful for M&A,” Anu Aiyengar, global co-head of M&A at JPMorgan Chase, told the newspaper, adding that she expects activity in the second half of the year to be even lower than the first half. This is partly because of the war and the fact that “private-equity, which has been a significant driver of the overall market, seems to be a little bit more on the sidelines,” she said.

MEANWHILE- Saudi crude exports rose in July to their highest levels since 2020, according to tanker-tracking data compiled by Bloomberg, which shows that 7.5 mn barrels a day left the country on average last month, up 14% from June. This came following the visit from US President Joe Biden to the kingdom earlier last month, where he lobbied Riyadh to increase export volumes to calm global oil prices, which have surged following Russia’s invasion of Ukraine.

EARNINGS WATCH- HSBC comfortably beat earnings estimates for 2Q 2022, yesterday reporting a post-tax profit of USD 5.8 bn as rising interest rates boost the bank’s loan income. The bank said it will move to gradually restore its full pre-pandemic dividend on the back of the strong earnings. (Earnings release, pdf)

ALSO FROM PLANET FINANCE-

  • M&A Watch: Saudi Aramco will buy motor oil and lubricant producer Valvoline’s global products unit in a USD 2.65 bn transaction. (Statement)
  • Recession Watch: Hong Kong has fallen into its second recession in three years as China’s zero-covid policy takes its toll on the financial hub. The city’s economy contracted 1.4% during 2Q 2022, following a 3.9% drop in 1Q. (Financial Times)
  • Crime Watch: Deutsche Bank is under fire for allegedly helping clients commit tax fraud, costing the German government mns in revenues. (Financial Times)
Down EGX30 9,423 -0.5% (YTD: -21.1%)
None USD (CBE) Buy 18.90 Sell 19.01
None USD at CIB Buy 18.93 Sell 18.99
None Interest rates CBE 11.25% deposit 12.25% lending
Up Tadawul 12,339 +1.2% (YTD: +9.4%)
Up ADX 9,778 +1.2% (YTD: +15.2%)
Up DFM 3,377 +1.2% (YTD: +5.7%)
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None Euro Stoxx 50 3,707 0.0% (YTD: -13.8%)
Down Brent crude USD 100.20 -3.6%
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Up Gold USD 1,787.70 +0.3%
Down BTC USD 23,011 -2.5% (YTD: -50.2%)

THE CLOSING BELL-

The EGX30 fell 0.5% at yesterday’s close on turnover of EGP 1.11 bn (26.8% above the 90-day average). Foreign investors were net sellers. The index is down 21.1% YTD.

In the green: GB Auto (+2.5%), e-Finance (+2.2%) and Alexandria Container and Cargo Handling (+2.1%).

In the red: Heliopolis Housing (-3.8%), Medinet Nasr Housing (-2.8%) and Fawry (-2.5%).

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

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