Global 2017 M&A Summary
2017 saw a strong year for global M&A with deal volume remaining above 2014 levels for the third consecutive year. In the UK, both outward and inbound M&A volume increased, despite Brexit uncertainty, the UK continued to be a major target for overseas buyers with a total deal value up 69.6% compared to 2016.
2017 saw the highest outward UK M&A on record since 2000.
Globalisation continued with cross-border transactions amounting to a third of total transactions as companies seek to spread risk in times of geopolitical uncertainty. European companies being acquired by non-European buyers were the highest on record at 12.3%, and the UK remained the top European destination for US outbound deals.
Outbound Asia-Pacific deal flow fell by almost half, largely due to the fall in Chinese overseas investments as Beijing tightened capital controls after growing concerns that too much money was leaving the country, although China remains an increasing M&A destination particularly for sellers.
Technology was the leading M&A sector comprising 17.8% of all M&A. A key driver was traditionally non-technology companies looking to drive innovation and capitalise on existing platforms rather than develop their own.
Outlook for the year ahead
Continuing into 2018 we expect global M&A to remain strong with the ECB and Fed continuing their quantitative easing programs keeping borrowing costs low and North American tax reforms expected to free up cash for buyers and could fuel a wave of noncore disposals thanks to lower taxes on resulting gains. Going forward, China’s “one belt, one road” policy could act as the catalyst to bring outbound M&A levels back to 2016’s heights.
Translink in the UK is seeing M&A activity in areas outside of the traditional US and “close European” countries, with South Africa and China showing strong buying signals.
EU activity feels relatively low at present most likely due to Brexit uncertainty, although some specialised sectors are seeing activity: software and life sciences for example that tend to be clustered in centres of excellence.
We are currently seeing a lot of UK activity with sellers that have assets are most likely to appeal to UK buyers (due to size and/or sector for example) reflecting a UK sentiment among particularly SMEs that they have heard enough on Brexit and it is business as usual for them. Whether that remains the case, time will tell.
The UK is awash with private equity and venture capital money looking for growth stories to invest in. Experience tells us two things: the first is that there is no lack of confidence to invest and secondly for Private Equity investments it is a sellers’ market.
Bolt-on activity is high for PEs although with a slightly dampened appetite outside of the UK – almost certainly due to Brexit uncertainty.
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