OUR INSIGHTS INTO M&A TRENDS:
PREVIEW OF 2019 REPORT
OUR INSIGHTS INTO M&A TRENDS
WE CONSIDER THE RISKS AND OPPORTUNITIES FOR 2019.
A business positioning itself for growth through M&A in 2019 is doing so against a backdrop of shifting political, social and trade dynamics.
The pace of change has never been so fast, yet may never be as slow again. This is compelling businesses to capture value across borders in new ways, including through creative and unexpected alliances, and pursuing innovative deal structures.
Meanwhile, agile businesses are playing by new rules, and regulators are struggling to flex and adapt existing rulebooks for new technologies and business models.
Trade wars are most evident in terms of tariffs and traditional trade barriers, but are increasingly fought online. As China rivals the US as a technology power, both are restricting the free flow of technology and data. Measures from the US target Chinese tech companies, whereas China has established its own brand of robust cyber-sovereignty, tightly controlling the flow of data in and out of its territory by both legal and technological means.
Separately, the EU and others are also reinforcing their offline borders online. As technology and data become ever more valuable assets, how they are traded across borders and how laws affect their value play an increasingly central role in cross border M&A.
Smarter use of IP
Businesses are relying more and more on data and technology to differentiate themselves and are making creative and smarter use of their IP in M&A to enhance deal value and bring advantage in negotiations.
IP assets, because of their flexibility as an asset class, fuel opportunities for innovative M&A and creative exploitation by enhancing existing offerings and enabling diversification. This flexibility drives M&A value, often with the combined elements achieving value far greater than the sum of the parts.
Hard assets: the search for stabilitiy
In an uncertain world, the stability and predictability of hard asset returns have renewed appeal for asset managers and an increasing array of investors.
Investments in strategic assets, including transport, social infrastructure and networks also bring influence at a time when it is important to have a seat at the table.
As global and local events impact the certainty of traditional infrastructure markets, institutional investors are looking further afield for opportunities. This globalisation of the hard assets market is prompting a degree of convergence in M&A terms and process.
Doing deals differently
Deal-making is increasingly about innovative collaboration.
Alliances may be uncomfortable for the uninitiated, but the rise of big tech is seeing rival incumbents in a range of sectors club together, sometimes in addition to or instead of M&A.
The drivers are diverse – better terms and benefits from suppliers, creating more opportunities for sharing data, or sharing the risks and expense of significant R&D. We are also seeing businesses embrace cross-industry platforms as a new way of bringing together complementary strengths.
GLOBAL ACTIVITY LEVELS
WE REVIEW MERGERMARKET'S DATA FOR M&A ACTIVITY (BY VALUE) FOR THE YEAR TO DATE.
- Global M&A deal value is up 24% in the year to date at US$3.2trn. Deal volumes are down 8%. The period March to May 2018 saw announced deals of US$1.3trn, including several of the year’s top deals, such as Takeda/Shire and Cigna/Express Scripts.
- M&A values are up in all major regions, with the largest increases in North America (+32%) and LatAm (+45%), whilst Middle East/Africa M&A is fl at (-2%). European M&A (+20%, US$872bn) centres on the UK and Germany. Asia Pac M&A is up 12%, including a signifi cant increase from Europe into the region (+189%), and in particular from Europe into China.
- Cross border M&A comprises 38% of total M&A globally. Nearly half (46%) of the value of European M&A is inbound from North America and Asia Pac (being the two largest cross-regional investment fl ows globally). Total China outbound activity is slightly down, with less Chinese investment into the rest of Asia Pac, but an increase in the value of Chinese deals into Europe and Middle East/Africa.
- The hottest sectors in 2018 (in terms of total deal value and rise in market sector share) are TMT and Energy, Mining and Utilities. The top deal by value in the TMT sector was T-Mobile/Sprint, and in the Energy/Mining/Utilities sector was Energy Transfer Partners/Energy Transfer Equity.
- Financial sponsor M&A globally in 2018 is $857bn, which comprises 27% of total M&A (down 3% compared to the same period in 2017). Financial sponsor IPOs total $65bn, which is 40% of total IPO value globally.
Source: Mergermarket, for the period 1 January 2018 to 20 November 2018
OUR 2019 M&A TRENDS REPORT WILL BE PUBLISHED HERE IN JANUARY 2019