POTENTIAL RISKS
Our forecast is based on the expectation that global transactions will continue to recover in the next two years amid stronger global economic growth, a rebound in commodity prices, and a gradual rise in interest rates.
However, a number of economic and political risks could disrupt the global recovery, causing a drop in M&A and IPO activity. Those downside risk scenarios include:
THE NEW US ADMINISTRATIONS PURSUES PROTECTIONISM If the new US administration adopts protectionist trade policies, fails to implement a fiscal stimulus package, and proceeds with immigration curbs and deportations that result in labor shortages, the US economy could weaken. Against a backdrop of heightened uncertainty, transactional activity could fall.
THE CHINESE GOVERNMENT EASES GROWTH TARGET If the Chinese government decides to slow credit growth to more sustainable long-term rates, fixed investment in China, particularly in the real estate sector, would fall sharply. Slower growth in China would undermine global commodity demand and prices, as well as manufactured goods trade, resulting in exchange rate volatility and a drag on world growth.
A DISORDERLY BREXIT EXPOSES EUROZONE VULNERABILITIES If it becomes apparent that the UK government is unable to attain favorable trading relations with the EU member states, private spending could grow more slowly than expected. UK and Eurozone consumers and businesses could also prove to be more sensitive to the price impacts of exchange rate movements and new trade tariffs. If so, Brexit could weaken consumer spending and investment across Europe more than expected, dampening M&A and IPO activity.
THE NEW US ADMINISTRATION PURSUES GROWTH-FRIENDLY POLICIES If President Trump adopts a less protectionist stance than during the campaign, limits the increase in deportations, and pursues initiatives to deregulate the economy, the US economy could grow more quickly than the baseline. That could spill over into wider world growth and push transactional activity higher than our forecast.
ADVANCED ECONOMIES IMPLEMENT FISCAL STIMULUS Because of cuts to public investment in the US and Europe during the austerity era, the need for infrastructure investment has become urgent. If these governments take advantage of historically low interest rates to pursue major infrastructure investments, that would boost employment and transactions in sectors like construction in the US and Europe. It would also stimulate growth in other countries producing the necessary commodities and manufactured goods for these projects. As a result, we could see higher levels of transactional activity than predicted.
On the other hand, the emergence of some upside risk scenarios could lead to higher-than-expected transactional activity in key markets. Those include:
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Global M&A Outlook
Regional M&A Outlook
Sector M&A Outlook
IPO Outlook
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)
SUMMARY
INTRODUCTION
MACRO TRENDS
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RISKS
CONCLUSION
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INTERACTIVE TOOL
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HOME
MACRO TRENDS
INTERACTIVE TOOL
SUMMARY
INTRODUCTION
RISKS
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FORECASTS
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APPENDIX
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Michael F. DeFranco
Koen V. Vanhaerents
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