By Liana B. Baker and Pamela Barbaglia
NEW YORK/LONDON (Reuters) - Global mergers and acquisitions dropped to $783 billion in the third quarter, down 35 percent from the prior quarter, as the escalating trade dispute between the United States and China cast a shadow on the financial and regulatory prospects of some deals.
U.S. chip maker Qualcomm Inc pulled its planned $44 billion acquisition of NXP Semiconductors NV in July after China delayed offering antitrust clearance, a move seen as retaliatory to the trade tariffs announced by the United States.
This has cast uncertainty on the prospects of other deals involving global companies that require Chinese regulatory approval, including aerospace supplier United Technologies Corp's $23 billion acquisition of Rockwell Collins Inc.
"We've got some clouds on the horizon, vis a vis a trade skirmish, or potentially a trade war with China. You have the potential for a hard Brexit and we've got rising rates," said Mark Shafir, Citigroup Inc's global co-head of M&A.
The number of global announced deals hit its lowest since 2013, at about 9,135, and global deal volume was down 6 percent compared with a year ago. To be sure, dealmaking activity has remained stronger than average and the first nine months of 2018 saw global M&A reach a new record of $3.2 trillion.
M&A activity in Europe has been particularly strong, with deals worth $962.5 billion so far this year, a 72 percent increase compared with a year ago and the strongest period for European dealmaking since 2007.
U.S. M&A, which rose 14 percent year-over-year to $368.1 billion in the quarter, fared better than other regions. Announced deals in Europe fell 14 percent to $151.4 billion, while M&A in Asia-Pacific was down 38 percent to $185.1 billion, the Thomson Reuters data showed.
Among the third quarter's biggest announced deals were chipmaker Broadcom Inc's $18 billion acquisition of software maker CA Inc, and Dell Technologies Inc's proposal to pay $21.7 billion in cash and stock to buy back securities related to its stake in software company VMware Inc.
In August, dealmakers had been chasing potentially the largest buyout of all time, after billionaire Elon Musk tweeted that he had the funding secured to take electric car maker, Tesla Motors Inc private, valuing the company at $72 billion.
Musk had said he had held early talks about the buyout with Saudi Arabia's Public Investment Fund, a move that highlighted the growing importance in alternative pools of capital around the world, from sovereign wealth funds to pension funds. Musk decided to scrap the plan and was sued on Thursday by the U.S. Securities and Exchange Commission over his tweets.