2017 M&A Global Outlook

Finding opportunities in a dynamic market

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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.

Bar chart for Block Average Daily Volume and Average Trade Size
Bar chart showing Block Average Daily Volume and Average Trade Size information

Sources: J.P. Morgan, Dealogic and IMF GDP forecasts as of January 10, 2017; M&A as a % of GDP is rounded to the nearest decimal

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.

2016 M&A Takeaways

  • 62%

    all-cash deals

  • 36%

    cross-border deals1

  • 310%

    China outbound surge2

  • $822bn

    private equity dry powder3

Trends shaping the M&A market in 2017

1An active M&A market continues

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.

Factors for M&A in 2017

MODEST GDP GROWTH

M O D E S T G D P G R O W T H

LOW COST OF FUNDING

L O W C O S T O F F U N D I N G
S T O C K P R I C E R E A C T I O N S

STOCK PRICE REACTIONS

2 Regulatory uncertainty will remain

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.

R E C O R D P R I V A T E E Q U I T Y D R Y P O W D E R

RECORD PRIVATE EQUITY DRY POWDER

N E W U . S . A D M I N I S T R A T I O N

NEW U.S. ADMINISTRATION

B R E X I T

BREXIT

C H I N A O U T B O U N D

CHINA OUTBOUND

3 Cross-border transactions continue to provide a source of value creation

As companies continue to look for strategic growth, new regions provide exposure to different economic, market and consumer dynamics.

U.K. M&A OPPORTUNITIES

U . K . M & A O P P O R T U N I T I E S
J A P A N O U T B O U N D

JAPAN OUTBOUND

4 Activists will remain prominent

Activists continue to prove adept at challenging corporate strategies and expanding their influence globally.

C O N T I N U E D G L O B A L I Z A T I O N

CONTINUED GLOBALIZATION

I N S T I T U T I O N A L I N V E S T O R E N G A G E M E N T

INSTITUTIONAL INVESTOR ENGAGEMENT

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Key drivers behind the trend

Explore about China’s Increasing Outbound M&A
  • 1Cross-border transactions accounted for 36% of total M&A volume in 2016
  • 2China outbound surge into U.S. and EMEA, 2016 versus 2015
  • 3Source: Preqin as of December 31, 2016; dry powder: capital available for investment purposes
  • 4In 2016, 20% of all announced transactions with a value in excess of $500 million resulted in a positive share price 5-day reaction of at least 5%. Based on excess return over S&P 500 returns times acquirer’s beta from unaffected date prior to announcement.

Note: M&A market data source: Dealogic, unless otherwise noted



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