After a flurry of megadeals in the second half of 2015 pushed global M&A deal values to the highest they've been since 2007, deal making slowed substantially in 2016 amid major economic and political uncertainty in several key economies. M&A transactions fell 17% by value in 2016, and would have fallen further if not for the conclusion of several long-running negotiations, such as Anheuser-Busch InBev's takeover of SAB Miller, which required regulatory clearance in the US, EU, China, Australia and South Africa. Meanwhile, IPO transactions fell by 36% as companies delayed listing amid heightened volatility in financial markets.
This slowdown raises key questions for investors: When will the global economic outlook become more certain? What impact will the new US administration have on deal appetite? And if we do experience a disorderly Brexit, re-ignition of the Eurozone crisis, or more severe slowdown in the Chinese economy, how will this impact global transactions?
This report, our second annual Global Transactions Forecast, seeks to answer these questions by examining the macroeconomic, financial and structural factors that underpin M&A and IPO activity. By providing this outlook, we aim to provide corporate leaders and investors with a better sense of the macroeconomic environment they are likely to face in the next four years so they can make more informed investment decisions.
We are clearly still in volatile times but deal-making is there to be done. Strong corporate balance sheets, cheap finance and moderate growth across markets and key sectors all point to an improving M&A run-rate later in 2017, after a cautious first quarter, and a significant uptick in 2018. The caveat is we need a benign Trump on trade and a soft-ish Brexit. Will we get that? Let's see.
Paul Rawlinson, Baker McKenzie's Global Chair