The Future of the Deal
The Beginning of a New Mergers and Acquisitions Season
After four consecutive years of crossing the $3 trillion annual mark, the M&A market continues to surpass expectations. It crossed the $1 trillion mark within the first three months of 2018, the fastest ever pace.
While deals are growing in size, so is complexity. In The Future of the Deal we explore the themes fuelling global M&A and consider how businesses should respond to market threats and opportunities.
What’s fuelling Global M&A?
- The pace of technological disruption is impacting every sector, unleashing a fundamental shift in M&A. 60% of disruptive technology acquisitions were done by non-technology sectors in 2017, as all sectors seek to capture innovation-led growth. Since 2015, companies have spent $634 billion on acquiring emerging technologies, and these disruptive M&A deals will be one of the key drivers of the M&A market.
- Such disruption is also forcing companies to divest non-core or non-performing assets. And there is added pressure from activist shareholders, who are making demands for portfolio restructuring and growth investments. 7 in 10 businesses are planning to divest at least one asset in 2018, however successful execution may be challenging owing to market uncertainties and carve-out complexities.
- Private Equity (PE) made a strong comeback in 2017 as deal flow hit $467 billion, the highest since 2007. PE firms are sitting on nearly $1 trillion of unallocated capital and are under pressure to deploy this capital. We expect them to be one of the major forces driving M&A in the coming months.
- Finally, US tax reforms are expected to have a major impact on M&A this year. US companies are sitting on an estimated $1.4 trillion of cash parked overseas and these new reforms are expected to give a major boost to cash repatriation and in turn could give a boost to US focused M&A activities.