Executive Summary/Highlights:

• Global M&A volume in Q1 exceeded US$700 billion, the second highest start to the year since 2011, but lower than the quarterly volume of the record-setting levels of 2015.

• Europe accounted for one quarter of Q1 deal activity, relative to a near-term historical average of only 15%. China was another strong performer in Q1, driving 22% of global deal activity (compared to a recent average of 14%).  Notably, Europe and China together produced nearly half of the quarter’s deal activity (compared to a recent average of 30%).

• Cross-border M&A activity accounted for 43% of global deal volume in Q1, significantly higher than recent levels. Six of the 10 largest deals in Q1 were cross-border transactions, accounting for half of the quarter‘s US$300 billion in cross-border deal volume.  Cross-border deals involving a Chinese acquiror jumped to over US$80 billion, more than 25% of all cross-border deal activity in the quarter.

• Cross-border M&A in the Materials sector had its strongest quarter of the past year. Cross-border activity also continued to build momentum in the Energy & Power and Retail sectors, with a second consecutive quarter of growth.  The Industrials sector produced the largest amount of cross-border volume in Q1, approaching US$60 billion.
• Stock market volatility, concerns about a slowing Chinese economy, low commodity prices, and a challenging regulatory environment for certain larger transactions in the United States could be tempering forces in 2016.  However, acquirers continue to maintain large cash balances (carried at virtually zero return) and attractive acquisition currency in the form of their stock, and most corporate borrowers can obtain relatively attractive financing terms.  Coupled with the continued drive for global scale and synergies and consolidation in key industries, this environment remains conducive for robust M&A activity.

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