Global mergers and acquisitions (M&A) had their strongest start ever in the first quarter of 2018, totalling $1.2 trillion in value, as U.S. tax reform and faster economic growth in Europe unleashed many companies’ dealmaking instincts.

Strong equity and debt markets and swelling cash coffers also helped boost the confidence of chief executives, convincing them that now is as good a time as ever to pursue transformative mergers, dealmakers said.

‘U.S. tax clarity unclogs’

“The clarity on tax has unclogged some of the M&A activity that was strategically imperative, but companies were waiting for the right financial timing,” said Anu Aiyengar, head of North America M&A at JPMorgan Chase.

While the value of M&A deals increased 67% year-on-year in the first quarter of 2018, the number of deals dropped by 10% to 10,338, preliminary Thomson Reuters data show, reflecting how deals on average are getting bigger.

Among the largest deals clinched this quarter were U.S. health insurer Cigna Corp.’s $67 billion deal to acquire U.S. pharmacy chain Express Scripts Holding Co. and German utility E.ON SE’s $38.5 billion deal to acquire RWE AG’s renewable energy business Innogy SE.

Europe volumes double

M&A volumes doubled in Europe in the first quarter, while the U.S. was up 67% and Asia was up 11%.

“The better macro-economic environment in Europe has created greater confidence to get things done. Deals that have been in the works for a long time are now coming to fruition and some industries like utilities are being completely reshaped by the latest wave of consolidation,” said Borja Azpilicueta, head of EMEA Advisory at HSBC Holdings Plc.

In the U.S., the stock market rally was thwarted by U.S. President Donald Trump’s announcements on trade tariffs on Chinese imports. Corporate valuations are still elevated, but market volatility has increased.

“Companies have become more aggressive in pursuing deals that make strong strategic sense. But valuations remain high and boards have recently become more cautious on large acquisitions, as it is more difficult to convince their investors of the potential for value creation at such price levels,” said Gilberto Pozzi, co-head of global M&A at Goldman Sachs Group Inc.

Regulatory risk has also increased. Mr. Trump’s dramatic intervention that blocked Singapore-based Broadcom Ltd.’s $117 billion hostile bid for U.S. chip maker Qualcomm Inc. on grounds of national security underscored heightened U.S. concerns about losing out to China in the race for new technologies.

“While every auction used to see at least one Chinese participant, now people are questioning their ability to deliver and are conscious of the political pushback that Chinese bidders could face,” said Johannes Groeller, a partner at PJT Partners Inc.

On the antitrust front there is also some uncertainty. The U.S. Department of Justice has sued to block U.S. telecommunications company AT&T Inc.’s $85 billion deal to buy media company Time Warner Inc. over concerns about how the two companies would consolidate their sectors.