Global M&A Decline In Q3 of 2017 Likely Due to Geopolitical Uncertainty

Third quarter of 2017 experienced a decline in global M&A closings. Data released from PitchBook in the beginning of October 2017, showed that globally 3,756 deals (worth $474.3 billion) were closed in Q3 2017, compared to the 4,701 deals (worth $698.8 billion) recorded in Q2 2017 and the 5,971 deals (worth $579.9 billion) closed in Q1 2017. 

While each region is unique and features varying M&A issues, the decline in global deal-making has been largely attributed to uncertainty resulting from recent geopolitical developments.

In the United States, for example, the Trump administration’s plans to overhaul the corporate tax code have added more uncertainty as companies contemplate its potential effects on valuations. The new proposed tax plan calls for lowering the corporate tax rate to 20% and setting the top pass-through income tax rate at 25%. Furthermore, recent presidential decisions to block certain inbound transactions under the recommendation of the Committee on Foreign Investment in the United States (“CFIUS”) is also impacting cross-border deal-making, especially from China.

In addition to foreign regulatory challenges, Chinese buyers are also facing increased domestic regulation. In November 2016, State Administration of Foreign Exchange (“SAFE”) issued new restrictions on outbound investments in an effort to curb the outflow of capital, and further depreciation of Chinese currency. Following the implementation of these rules, China’s State Council issued new guidelines specifically restricting investments in “real estate, hotels, entertainment, sport clubs, outdated industries and projects in countries with no diplomatic relations with China, chaotic regions and nations that should be limited by bilateral and multilateral treaties concluded by China.”

Despite such new regulations restricting cross-border deal-making, the Chinese government continues to encourage Chinese companies to pursue deals that would promote China’s 2013 Belt and Road Initiative, which is a national initiative with the objective of becoming a global economic leader in areas like manufacturing, and deals that would otherwise benefit China’s domestic products and technology.

In Europe, Germany has recently amended its German Foreign Trade Regulation

introducing stricter rules on foreign acquisitions, strengthening its review rights, broadening the notification requirements and extending the time limits for review. According to a joint letter obtained by Reuters, Germany, France and Italy also proposed to the European Commission that foreign investments should only be permitted if reciprocity exists and that a protection mechanism should be established for investments by state-owned investors.

Moreover, Spain and the U.K. are experiencing volatility as Catalonia attempts to secede from the country and the British government attempts to implement its planned departure from the European Union.

Despite uncertainty and resulting decrease in deal-making in Q3, a number of sizable deals were made during the period, such as General Electric’s buyout of Baker Hughes, and industry experts further expect M&A activity to press forward through the end of the year in light of availability of inexpensive capital. 

Leave a Reply

Close Menu

David Kim| PARTNER

David Kim is a Partner at Parsus LLP. He specializes in corporate and technology transactions, with an emphasis on intellectual property. David has represented a variety of clients from start-ups to Fortune 500 companies in mergers and acquisitions, cross-border investment, financing, and licensing. His clients do business in a range of industries including entertainment, financial services, consumer products, gaming, software, and technology services.

Prior to returning to Parsus LLP, David served as an in-house intellectual property counsel for NBCUniversal, advising on technology and mergers and acquisitions for the various business units of the company. He assisted the company’s corporate development teams in assessing acquisition targets and negotiated NDAs, vendor service agreements, software and hardware licenses, and trial agreements for experimental and prototype technology. David was also one of the company’s primary resources on open source software-related matters.

Before joining NBCUniversal, David co-founded and served as a Partner of Parsus LLP, worked as in-house counsel for start-ups, and was an associate at Winston & Strawn, where he represented clients in intellectual property matters including patent assessment and analysis, IP licenses, and various phases of patent and copyright infringement litigation. At Winston, David also represented clients in general business and securities litigation concerning commercial disputes and business torts.

Kristen Lee
Kristen Lee
| ASSOCIATE ATTORNEY

Kristen Lee is an associate attorney at Parsus  LLP.  Her practice is focused on commercial transactions and the various day-to-day legal needs of businesses of all sizes, including business formation, corporate governance, commercial contracts, and mergers and acquisitions. Prior to joining Parsus, Kristen represented corporate clients in high-stakes litigation involving breach of contract, fraud, unfair competition, and other business torts.  

Kristen is a member of the Korean American Bar Association of Southern California.

Kristen received her B.A. degree from the University of Texas at Austin and her J.D. degree from Pepperdine School of Law.  Kristen is fluent in Korean. 

EVELYN SHIMAZAKI
| OF COUNSEL

Evelyn Aguilar Shimazaki is Of Counsel at Parsus LLP. Her practice is focused on the representation of technology companies in intellectual property licensing and commercial transactions, including joint development, manufacturing, procurement, strategic alliances, outsourcing and other services arrangements. Prior to joining Parsus LLP, Evelyn was a Senior Counsel at Apple in Cupertino, California for fourteen years. After Apple, she joined Tesla in Palo Alto, California as Chief Counsel and more recently, Oculus VR, a division of Facebook in Menlo Park, California as a Consultant.  

Evelyn is a Founding Board Member of UCLA Law Women LEAD, an Advisory Board Member of the Lowell Milkin Institute of Business Law and Policy at UCLA School of Law, and a past President and Advisory Board Member of the Philippine American Bar Association of Los Angeles.

Evelyn received her B.A. degree from the University of California, Berkeley and her J.D. degree from UCLA School of Law. A native of the Philippines, Evelyn speaks Tagalog, Spanish and some Japanese.

Ju Park
| MANAGING & FOUNDING PARTNER

Ju is a corporate lawyer by training and an entrepreneur at heart.  After attending the United States Military Academy at West Point for a year where she gained essential life skills including throwing grenades and applying a tourniquet, she graduated from McCombs Business School at the University of Texas majoring in finance.  Ju then graduated from UCLA School of Law where she focused her studies on International Business Law.  After law school, she practiced corporate law and litigation in the Los Angeles and Hong Kong offices of an international renowned law firm, Latham & Watkins, where she advised domestic and foreign clients, including Fortune 500 companies, on various corporate matters including general commercial contracts, corporate finance, IPOs and mergers and acquisitions.

Ju co-founded Parsus in 2009 with a vision to transform the legal services industry to make quality legal advice more available to and affordable for businesses of all sizes while improving the lifestyle and overall happiness of lawyers.  Over the years, and particularly since recently becoming a mother, Ju’s vision for Parsus has expanded to transform our extended community by committing a part of the firm’s profits and resources for charitable purposes.

In her role at Parsus LLP, Ju serves as outside transactional and general counsel to clients of all sizes and across a broad range of industries.  Her clients include domestic and foreign companies to whom she provides practical and cost-effective solutions to their general day-to-day business legal matters as well as major transactions such as mergers and acquisitions, corporate finance and cross-border transactions.  Ju combines her legal expertise with her business acumen to provide practical solutions to her clients’ legal issues without “over-lawyering” their contracts or deals.  Ju’s recent clients have included foreign and US companies acquiring and/or investing in US companies or assets, US companies receiving foreign and domestic investments, US subsidiaries of foreign companies going public, and foreign companies with ongoing US operations.  Ju also enjoys working with like-minded entrepreneurs and start-up executives.