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M&A value at 2nd highest level in 15 years
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M&A value at 2nd highest level in 15 years

An increase in geopolitical turbulence has not slowed down the global transactions market, according to an Allen & Overy report.

The firm’s ‘M&A Insights’ quarter four report highlighted “a growing accent on very big, strategic deals,” with the value of transactions up by 32 per cent compared to 2017 figures.

This is despite a 10 per cent fall in deal volumes, with cross-border activity continuing to grow its market share.

The report noted that megadeals “are dominating again,” with transactions worth more than US$10 billion having risen by 120 per cent “to reach their second highest figure in the last 15 years.”

Similarly, the number of deals “in excess of US$5 billion are also at their highest level for a decade.”

This year, the Asia-Pacific region, excluding China, saw a 35 per cent increase in deal value compared to figures from the same period in 2017.

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With a 12 per cent portion of the world’s M&A deals by value, this placed APAC on par with Greater China’s M&A percentage, which saw a 15 per cent dip in deal values from 2017’s figure of 25 per cent.

Despite a prevalence of megadeals continuing “to power the global market,” the report alluded to “tough political challenges” facing globalisation that are linked to “a lurch towards protectionism.”

These tough political challenges include Brexit, as well as ramifications from the US and China trade war.

“While companies remain resolutely global, we may see some choosing to focus on one or two regions,” it predicted, with continued confidence of CEOs apparent.

The factors attributed to this confidence included the fact that companies continue to perform strongly, and “have strong cash reserves and ready access to finance.”

Additionally, capital markets have remained buoyant and stable, “although we’ve seen greater turbulence in recent months.”

Provided “finance remains readily available and markets don’t fall off a cliff,” the report stated the “drive to do strategic deals is likely to continue,” even where “it’s prudent to expect that 2019 may be quieter.”

For Allen & Overy’s global co-head of corporate, Dirk Meeus, “continued boardroom confidence in the context of global market volatility flies in the face of the accepted wisdom that M&A likes certainty.”

He noted that “this era of disruption offers new opportunities, with gaining access to transformational technologies a powerful motivation to do deals across almost every sector, particularly bringing TMT and life sciences deals to the fore.”

 

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