M&A - The Global Picture
As 2015 dawns, it is time to reflect on a strong recovery in the M&A market globally, and the opportunities that lie ahead this year. Last year brought the long-awaited resurgence in M&A.
Global Head of Corporate
Global M&A deal values topped US$ 3.23trn in 2014 – a level not seen since before the global financial crisis. We have been seeing, in particular, a rise in cross-border transactions, including between regions, as corporates seek to expand their global footprints and enter new markets. Financing deals is not generally a problem, with excess cash on balance sheets and liquidity available from multiple global sources through an ever-increasing variety of innovative structures.
The US saw the lion’s share of inbound cross-border activity over the past 12 months as bidders from Europe, Asia Pacific and Latin America tapped into targeted opportunities. As confidence returned to US boardrooms, domestic and outbound activity from the US also flourished, driven in part by rising stock markets which allowed listed companies to finance large acquisitions with combinations of stock and cash. The first half of the year also saw a number of controversial ‘inversion’ deals, before the US administration acted in September to make inversions more difficult to accomplish by diminishing their economic benefits.
‘Broken deals’ also provide interesting hidden indicators of the health of the M&A market. In 2014, US$ 221bn of deals were announced but then withdrawn, up from US$ 87bn in the previous year. On the one hand it means that announced M&A in 2014 matched the peak of pre-crisis levels – further evidence of rising confidence and deals needing to be done. However, the sheer level of failed transactions demonstrates that the current deal-making environment has very significant challenges which require careful planning and execution.
As we look ahead to the rest of 2015, the picture is mixed: there are significant geopolitical and economic uncertainties that have the potential to stall M&A activity again in the months ahead – for example, should the growth rates in China or Europe slow further, political divides within the euro zone deepen, or fears around political gridlock in the US return. Oil prices seem to be on a sustained, downward trajectory, economic sanctions targeting Russia continue to bite, and the results of government elections in the UK and Greece may have impacts far beyond those countries’ own borders.
These and other similar macroeconomic and political concerns are combining to paint an uncertain global landscape for 2015. Their effect on M&A activity during the course of this year is by no means clear, but some of these challenges will create attractive opportunities for those who are informed, agile and prepared to take manageable risks.
Global Head of Corporate, Clifford Chance LLP