M&A - The Global Picture
The number of large strategic M&A transactions is an encouraging sign. The general upward trajectory in global equity markets is making stock an attractive currency for sellers, and a stronger US economy has seen US domestic and crossborder deals flourish - of the eight largest deals seen so far this year...
Global Head of Corporate
... six have involved US purchasers and seven have involved US targets. Financing is widely available, with the US high yield market proving stronger than anticipated. TMT is the stellar sector, as the industry consolidates, and multinational tech and telecoms providers increase their reach into new markets. Outside of the US M&A activity remains largely in the doldrums although there are pockets which are certainly flourishing – for example cross-border deals into Africa; Asian corporates targeting SE Asia; FIG deals in Asia; FIG and manufacturing deals in the UK.
The big question is when will the global market come back in earnest? We anticipate that M&A levels will continue to rise,driven by current cautious optimism and economic recovery in the US, which is also being seen, albeit to a lesser extent, in the UK and Europe. However the global economic recovery remains inherently fragile, underscored by continuing political uncertainty, with events such as the US debt ceiling impasse reminding us that political developments have the potential to impact any M&A revival.
So all in all I expect that the remainder of 2013 will be a natural continuation of the year to date, but that behind the scenes we will see an interesting M&A pipeline building for 2014. If the world economic recovery stays on track, I am optimistic that the resulting return of confidence will lead to increased activity next year. At the outset we will likely see opportunistic deals targeting rising sectors such as pharma and real estate, and targeting undervalued assets, particularly those in Europe. A stronger flow of strategic deals should follow, as boards begin to feel more confident in putting their piles of cash to work.
Global Head of Corporate, Clifford Chance LLP