With a number of promising drivers in place, we anticipate an active global M&A market in 2017, with deal volumes consistent with 2016 totals, as dealmakers around the globe continue to complement organic growth with innovative and transformative transactions.
Buoyed by strong fundamentals, a low cost of funding, and encouraging acquirer share price reactions to synergistic strategic fits, we expect dealmakers will continue to adjust to ongoing political and regulatory changes in the year ahead. In doing so, they may call upon their experience in navigating an uncertain landscape in 2016, one which despite volumes of $3.9 trillion, presented plentiful challenges for corporate decision makers in the form of geopolitical changes, heightened regulatory scrutiny and speculation around both Brexit and China.
While markets assess the effect of key global elections and regulatory changes, we expect 2017 to be driven by an ongoing active deal count rather than any meaningful increase in megadeals of more than $10 billion. Notwithstanding uncertainty, opportunities may emerge from potential new U.S. policies, such as proposed cash repatriation, corporate tax reform and more modest regulation.
We anticipate cross-border transactions will remain a feature of the M&A market in 2017, as companies continue to look to new regions to expand geographic reach and innovation capabilities. Key markets to watch include the U.K., where Brexit is likely to prompt companies to be more dynamic in their search for opportunities for expansion and growth; China, where outbound interest may be curbed by foreign jurisdictions seeking greater inbound reciprocity from China; and Japan, where a pickup in outbound M&A activity is anticipated, driven by uncertainty in local GDP growth.
China outbound surge2
private equity dry powder3
We anticipate consistent deal volume, encouraged by low cost of funding and positive acquirer stock price reactions4, as companies look to complement modest organic growth through M&A.
MODEST GDP GROWTH
LOW COST OF FUNDING
STOCK PRICE REACTIONS
The impact of 2016 electoral and referendum outcomes, in addition to a number of key global elections and administration changes slated for 2017, are likely to contribute to regulatory uncertainty.
RECORD PRIVATE EQUITY DRY POWDER
NEW U.S. ADMINISTRATION
As companies continue to look for strategic growth, new regions provide exposure to different economic, market and consumer dynamics.
U.K. M&A OPPORTUNITIES
Activists continue to prove adept at challenging corporate strategies and expanding their inﬂuence globally.
INSTITUTIONAL INVESTOR ENGAGEMENT
Note: M&A market data source: Dealogic, unless otherwise noted
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