December 16, 2016

Inbound M&A Post-Election: The Jury’s Out

This Dentons memo points out that 2016 has been a robust year for foreign direct investment in the United States – but says that the US election results have thrown continued growth in that area into question.  In particular, the memo notes the potential implications of changes in US policy on Chinese investment:

China has been the number two investor (behind Canada) in terms of inbound M&A for the year so far. In recent years it has favored investing in developed nations, viewing them as more attractive due to their stable and open economies. However, the rise of right-leaning populism in the US and Europe in the past year may prompt China devote more of its FDI to emerging, liberalizing economies—particularly those in Asia, such as Singapore, Vietnam and Malaysia.

With China already facing a sluggish domestic economy, tariffs enacted by the West could cause a substantial fall in the nation’s GDP due to its current reliance on exports; this could theoretically discourage Chinese investors from engaging in FDI at all. Considering that China is a hub for outbound FDI, we could see a slowing of the global M&A market altogether.

John Jenkins