Total deals values surged in 2015, as a strong pipeline of announced transactions were brought to market, encouraged by greater boardroom confidence and abundant liquidity. Dealmakers executed a total of US$3.4 trillion in transactions in 2015, up 36% from total deal values in 2014.
This upward momentum halted in the early months of 2016, however, amid stock market volatility generated by concerns over slowing growth in the Chinese economy, depreciation of the yuan as investors reappraised their China holdings and withdrew capital, and a sharp decline in oil and commodity prices.
Political risk in advanced economies became an increasing concern through 2016, as the run-up to the UK referendum on EU membership in June clouded investor confidence levels in Europe, and uncertainty leading up to the US presidential election in November cast a shadow over transactional activity in North America.
Given this challenging deal-making environment, M&A activity slowed to US$2.8 trillion in 2016, down from US$3.4 trillion in 2015. The slowdown would have been even more pronounced, particularly in the UK, if it weren’t for a number of megadeals already in the pipeline.
1 M&A transactions include both acquisitions of majority shares and partial interests. The transaction value is the total value of consideration paid by the acquirer, excluding fees and expenses.
GLOBAL-M_A-TRANSACTIONS
GLOBAL M&A TRANSACTIONS
As much of this uncertainty about the UK’s relationship with Europe and the policy agenda of the new US administration continues into 2017, we expect investors to remain cautious and M&A transactions to drop slightly to US$2.5 trillion. But as financial and economic conditions stabilize, corporate earnings strengthen and political tensions fade, we expect global M&A activity to rise to US$3 trillion in 2018 before dropping in 2019 and 2020 as global interest rates rise and equity valuations fall.
However, we don’t anticipate this downturn to be as sharp as those in 2001-02 or 2008-09 because market valuations are more in line with historic averages, and investors are likely to remain cautious during the upswing. As companies focus on core business strategies and increasing earnings growth, they are likely to divest noncore assets at attractive prices.
GLOBAL M&A OUTLOOK
GLOBAL M&A OUTLOOK
TRANSACTIONS FORECAST
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Michael F. DeFranco
Koen V. Vanhaerents
Contact
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Global M&A Outlook
Regional M&A Outlook
Sector M&A Outlook
IPO Outlook
Appendix A: Transaction Attractiveness Indicator
Appendix B: Country Forecasts
Appendix C: Methodology
M&A Transactions (US$B)
M&A Transactions (# Of Deals)
Domestic IPOs (US$M)
SUMMARY
INTRODUCTION
MACRO TRENDS
Baker-McKenzie-New-Logos
RISKS
CONCLUSION
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MACRO TRENDS
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