APPENDIX C
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To arrive at our forecasts for M&A and IPO activity by region, country and sector, we commissioned Oxford Economics to develop modeling techniques that relate historic changes in transactions flows to key structural and cyclical drivers. As part of that modelling approach, we employed a “panel data” construct that allowed us to model the impact of nine cyclical and structural explanatory variables (listed below) on M&A and IPO activity over time.
In estimating global transactional activity, we used data on completed deals rather than announced deal values, which are more typically reported in the media. From an analytical modeling perspective, it makes more sense to use completed deals for forecasting as it reflects the actual outcome. Additionally, we employed one regression equation using data for all 37 countries in our sample, thus allowing us to use variations in the data across time and countries. The panel data approach helps us account for many of the structural variables we wish to include (such as business environment measures), that change slowly over time. This approach also enables us to control for variables we cannot observe or measure, such as cultural factors.
We found that estimating global transactional activity separately for emerging markets and developed economies yielded better results. This likely reflects the fact that investors give different weightings to the factors that influence their transaction decisions when investing in developed economies versus emerging markets. When calculating our estimations, we grouped countries according to standard IMF classifications. We used the same approach for domestic and cross-border transactions.
EXPLANATORY VARIABLES
CYCLICAL VARIABLES
  • Stock market capitalization – local stock market capitalization/GDP
  • Trade/GDP
  • M2 (money supply/GDP)
  • Equity prices
  • Spread between 10-year government bonds in domestic market versus the US 10-year government bond
  • US VIX Equity Index
  • Current account balance/GDP
STRUCTURAL VARIABLES
  • Legal structure and property rights
  • Freedom to trade
METHODOLOGY
Michael F. DeFranco
Koen V. Vanhaerents
Contact
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Appendix A: Transaction Attractiveness Indicator
Appendix B: Country Forecasts
Appendix C: Methodology
M&A Transactions (US$B)
M&A Transactions (# Of Deals)
Domestic IPOs (US$M)
Global M&A Outlook
Regional M&A Outlook
Sector M&A Outlook
IPO Outlook
SUMMARY
INTRODUCTION
MACRO TRENDS
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RISKS
CONCLUSION
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MACRO TRENDS
INTERACTIVE TOOL
SUMMARY
INTRODUCTION
RISKS
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FORECASTS
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FORECASTS
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