LONDON/NEW YORK (Reuters) – Global mergers and acquisitions (M&A) plunged 16% year-on-year to $729 billion in the third quarter, according to Refinitiv data, the lowest quarterly volume since 2016, as growing economic uncertainty curbed the risk appetite of companies considering deals.

Concerns that the trade war between the United States and China has plunged global economic growth to its lowest levels in a decade weighed on dealmaking, even as debt financing for acquisitions remained cheap and equity markets stayed robust.

“M&A volumes have dissipated because there are concerns that risks may be rising in several spots, in markets and elsewhere,” said Michael Carr, global co-head of M&A at Goldman Sachs Group Inc (GS.N).

The United States, where consumer spending barely rose in the summer and business investment remained subdued amid the trade tensions, was particularly hit. U.S. M&A sank 40% year-on-year to $246 billion in the third quarter, the lowest such quarterly level since 2014.

Asia, which has been hit by concerns over the future of Hong Kong as a financial hub following a wave of pro-democracy protests, fared only slightly better. M&A activity in the region dropped 20% year-to-year to $160 billion, the lowest level since 2017.

Dealmakers said a mismatch between buyer and seller valuation expectations often proved hard to bridge, with some deals failing to reach the finish line.

“Companies looking at deals have become more risk-averse, and this is likely to bring M&A volumes down for the year. But we expect M&A activity to be strong going into next year,” said Robin Rankin, global co-head of mergers and acquisitions at Credit Suisse Group AG (CSGN.S).

The only regional bright spot in the third quarter was Europe, where M&A activity reached $249 billion, up more than 45% over the same period last year.

“In Europe we have seen a real mix of different kind of deals which were spread across various sectors and geographies,” said Eamon Brabazon, co-head of EMEA M&A at Bank of America Corp (BAC.N).

“This is a sign of a healthy market because we’re not relying only on a particular strand. There’s no obvious reason to believe the M&A market will turn south in the foreseeable future,” he added.

BREXIT BARGAINS

Britain, where uncertainty over Brexit has turned companies into cheaper acquisition targets, remained Europe’s biggest M&A market with a 6.4% share of global M&A and $177 billion worth of deals so far this year.

Sterling’s near record lows against other major currencies encouraged overseas buyers to snap up “UK Plc”, with Hong Kong’s richest man Li Ka-shing swooping on pubs operator Greene King (GNK.L) and buyout fund Blackstone (BX.N) leading a buyout for Madame Tussauds and Legoland owner Merlin (MERL.L).

A big attempted transaction in the third quarter was Hong Kong Exchanges and Clearing’s (HKEX) (0388.HK) proposed $39 billion takeover approach to the London Stock Exchange Plc (LSE) (LSE.L). The latter has so far rejected HKEX’s overtures.

The biggest deal attempted in the quarter was Marlboro maker Philip Morris International Inc’s (PM.N) bid to reunite with Altria Group Inc (MO.N), in what would have been the biggest corporate merger since 2016, creating a tobacco giant with a market value of more $200 billion. The deal was abandoned last week amid concerns about regulators cracking down on e-cigarettes and vaping products.

Among the big deals in the quarter that made it to the finish line and were sealed with merger agreements were the $24.6 billion merger of U.S. drug giant Pfizer Inc’s (PFE.N) off-patent branded drugs business with Mylan NV (MYL.O), and U.S. media companies CBS Corp (CBS.N) and Viacom Inc’s (VIAB.O) merger in a $20 billion all-stock deal.

As companies deliberate whether they should ink deals by the end of the year, dealmakers expect the M&A pipeline ahead to stay healthy, possibly matching last year’s annual volumes of $3.91 trillion in announced transactions.

“Management teams are watching very closely because shareholders expect companies to take advantage of these conditions to grow their business,” Goldman’s Carr said.

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