• North America Remains a Relative Bright Spot
  • Initial Public Offerings to Drop more than 20% in Value
  • Transactions Activity to Pick up Again in 2021 as Global Economy Rebounds

Global deal-making will experience a continued hangover in 2020 thanks to ongoing worldwide economic uncertainty and the risk of global recession, according to new report by Baker McKenzie. The report also reveals that the deal flow in North America is an outlier to the global trend, while technology, investor activism and private equity take center stage in pushing transactions forward next year.

The firm’s fifth annual Global Transactions Forecast, produced in conjunction with Oxford Economics, projects that merger and acquisition value will decline globally from $2.8 trillion in 2019 to $2.1 trillion in 2020. The report predicts a downward trend in IPO proceeds from an estimated $152 billion in 2019 to $116 billion, a 23% drop.

Amid the global slowdown in the transactions pipeline, there are three main deal drivers for activity in the foreseeable future:

  • Technological disruption: Across all sectors, companies will seek to acquire advanced digital capabilities that they cannot replicate in-house in order to remain competitive.
  • Activist funds and stakeholder capitalism: Activist investors and a heightened emphasis on stakeholder capitalism will keep pressure on boards to re-structure and respond accordingly with strategic changes.
  • Private equity ‘dry powder’: Private equity investors may seize upon the opportunities created by market volatility and keep transaction volumes afloat.

“Make no mistake — deals are getting done, but the current slowdown is inevitable considering the continuing uncertainty around trade and regulation,” said Ai Ai Wong, Chair of Baker McKenzie’s Global Transactional Group. “We know that around the world, there are many investors and companies with capital on the sidelines, waiting to move forward with domestic and cross-border deals.”

North America

Easy financing conditions, the impact of earlier tax cuts and the strength of the U.S. economy relative to Europe and Asia are driving deal activity in the US to date. A few headline-making transactions this year include the $84 billion acquisition of 21st Century Fox by Walt Disney; DowDuPont’s $40 billion spin-off of Dow Inc.; and the $8.1 billion Uber IPO. 

North America is expected to end 2019 with $1.5 trillion in domestic and cross-border M&A, an 8% decrease from 2018. For 2020, the Baker McKenzie report forecasts $1.1 trillion in deals. Domestic IPO activity in North America rose by 45% from 2018 to nearly $60 billion in 2019, IPO activity is expected to drop to $42 billion in 2020, in line with global trends, but also brought on in part by the market volatility that tends to come with a federal election year.

“Coming off of 2018’s highs, dealmakers in North America have had a fairly busy 2019, even though cross-border transactions activity is down,” said Michael DeFranco, Global Chair of Baker McKenzie’s M&A practice. “Right now though, investors are becoming concerned about high valuations and rising corporate leverage, and we’ve seen the market respond less-than-favorably to a number of large deal announcements recently. Going forward, we’re working with clients on planning for a deceleration, though a recession in the U.S. is not likely in the cards.”


Many factors have impacted European deal activity, including the slowdown in global trade, Germany’s economic slowdown, and of course, the constant uncertainty of Brexit. There is notable decreased appetite for acquisitions, and to make matters worse, European governments have increased regulatory scrutiny significantly in 2019. The same holds true for the equity markets, as many European companies were reluctant to move forward with IPOs in 2019, as IPO value dropped 60% from 2018 to $15 billion. The forecast predicts 2020 to continue this trend with European M&A activity falling from $567 billion in 2019 to $427 billion in 2020, a 25% decline. We see activity picking up in 2021, but concerns about a no-deal Brexit and potential trade issues between the EU and US potentially hurting a future recovery.

“Global IPO activity has been slow overall this year with significant political issues weighing on markets. There were bright spots, including in the domestic US market, which outperformed its 2018 totals,” said Koen Vanhaerents, Global Chair of the Capital Markets practice. “We’re in for a turbulent 2020, but the appetite is still there for capital raising, and the pipeline, particularly in North America is quite robust. There is a light at the end of the tunnel in 2021, with Brexit resolving and European economies settling into a more stable place.”

Asia Pacific

Due to a significant slowdown in cross-border activity particularly, Asia-Pacific dealmaking has fallen from highs in 2018. The US-China trade dispute was clearly evident, as well as sluggish Chinese outbound deals due to Chinese government scrutiny on outward investment by private firms. Japan has proven to be the exception to the slowdown, as conglomerates sell non-core assets and companies look for outbound acquisitions. In addition, Indonesia, Thailand and Vietnam have seen strong inbound activity.

Looking forward in the region, the forecast predicts M&A activity declining 18% from $634 billion in 2019 to $529 billion in 2020, and IPO activity will likely continue its slower trend from this year, which we expect will amount to $36 billion, a 43% decline from 2018. Singapore was a bright spot with two larger domestic offerings pushing the totals to $2.4 billion from $500 million in 2018. In addition, 2019 saw the launch of Shanghai’s STAR market as an alternative listing venue for mid-market tech IPOs in China. The market had a strong start but also fell victim to the slowing of the market.

Latin America

The 2019 deal environment in Latin America varied greatly depending on country. In Brazil, investor-friendly policy reforms have driven a healthy level of activity, but political and economic turmoil in other areas are exacerbating the negative effects of an already adverse external environment for Latin America. We expect to see a drop in M&A activity in 2020 from $90 billion in 2019 to $77 billion. The IPO market should also slow with hope for a rebound in 2021, as confidence builds in new governments and reforms.

Alternative Paths for the Global Economy

A range of upside and downside risks could impact the global economy and lead to a rise or drop in deal values and volumes that differ from the central transactions forecast presented in this report. To explore both upside and downside risks, the report looks at five different economic scenarios: Trade War Escalation, Protracted Eurozone Slowdown, US Recession Hits the Global Economy, No-deal Brexit, and Trade War Fears Fade. To understand how these hypothetical outcomes might impact the global economy and the implications for deal-making, you can go to our online GTF Interactive Tool.

Last year’s Forecast predicted an overall slowdown of the M&A market in 2019 and into 2020, which is consistent with current expectations. However acquisitions do remain an important growth strategy for companies worldwide, and we expect economic conditions to improve by sometime in 2021 and the forecast predicts a subsequent uptick in transaction activity.

“We’ve all seen so many of these cycles over the past 20 to 30 years,” said Ai Ai Wong. “Although markets today are driven by different forces, especially by the influence of technology, we cannot escape the ebbs and flows of markets and the interconnectedness of the world’s economies.”

About Baker McKenzie

Baker McKenzie is one of the leading firms for cross-border transactions, providing strategic advice on deals involving the world’s leading financial institutions and multinational companies. From deal inception to business integration, we provide an end-to-end service that helps clients bridge the gap between aspiration and achievement.

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