JPMorgan Mergers Co-Head Cristerna Sees Deals Slowdown Next Year

(Bloomberg) -- Dealmaking will probably decline in 2019 after a record-setting pace this year amid tighter regulatory scrutiny and steep valuations, according to Hernan Cristerna, JPMorgan Chase & Co.’s global co-head for mergers and acquisitions.

“Logic tells me that 2019 should be weaker than 2018, but I don’t think that the market is going to fall off the cliff" like after the tech bubble and financial crisis, Cristerna said Tuesday during an interview in London. “The market will be softer, but retain a very strong base."

From the U.S. to China to Europe, regulators are taking increasingly strong stances on some big takeovers. A U.S. court decision on Tuesday involving AT&T Inc.’s proposed purchase of Time Warner Inc. could have significant ramifications on deals that unite companies in different parts of an industry’s supply chain, known as vertical deals. Last week, Bayer AG completed its $63 billion acquisition of Monsanto Co. after an arduous two-year antitrust review.

“Those regulatory threats are what can really derail the market," Cristerna said, while declining to comment on specific rulings or transactions. “The other one is valuation. The market is very fully valued."

Mergers and acquisitions have soared 45 percent to $1.6 trillion so far this year amid rising stock markets, boardroom confidence and low borrowing costs. “We are fundamentally in an unprecedented M&A market,” Cristerna said. JPMorgan is the No. 3 adviser on mergers this year, with about $454 billion in deals, according to data compiled by Bloomberg.

“I am personally positively surprised by the strength of this M&A market because undoubtedly we are in a risk-on market,” Cristerna said. He also predicted a rebound in big Chinese acquisitions in coming years as the government pushes growth abroad in strategic industries.

“China will be back,” he said.

©2018 Bloomberg L.P.