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Old and new areas seeing M&A opportunity
Digital borders, intellectual property, real assets and strategic partnerships are the four areas where mergers and acquisition will see major impacts in 2019, according to a multinational firm.
Grace Ormsby
In Clifford Chance’s A Global Shift: Opportunities in a Changing Landscape, the firm considers 2019 to be a year where successful boards and investors will identify opportunity amid a number of challenges including trade tensions, political uncertainty and increased regulatory scrutiny.
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The report noted that while global M&A activity saw a ‘slight drop-off’ in the number of deals that took place in 2018, there was a 12 per cent increase in global value of M&A deals over the same period.
Cross border M&A comprised 38 per cent of total global deals reported, with a 222 per cent increase seen in cross regional investment flows from Asia-Pacific to Europe, valued at more than US$200 billion.
‘Digital borders’ was the first of the four major themes named by the report, with technology and data playing a central role in deals “especially when they become the focus of trade and political disputes”.
The report considered concern over digital borders as growing, with early signs of a push towards global rules governing e-commerce and cross-border data flows.
‘Intellectual property in M&A’ was also noted as key in 2019, due to their ability to be leveraged for value and used as a negotiating tool.
The report considered IP-rich businesses as being involved in some of the most “exciting deals today”, as data rises as an asset class.
Despite a rise in technological assets, real assets also appear to be trending, according to the report.
“Unprecedented levels of fundraising flowing to infrastructure, energy and real estate demonstrate the continued appeal of ‘real assets’ that offer predictable returns in an uncertain world”, the report explained, as demand outpaces supply in developed markets.
Innovative and strategic partnerships was the fourth theme explored by Clifford Chance as a less capital-intensive complement to traditional M&A.
The report showed that such combinations allow companies to pool expertise and share costs for the defending of market position or for expansion into new markets and technologies.
Clifford Chance’s head of global corporate practice Guy Norman said the falling of GDP growth, slowdown in China, and rising global debt has seen companies looking for new ways to defend their market position or expanding into new markets.
He considered that “fragmented political and economic responses to global challenges are creating greater complexity in trade and investment, but also opportunities for boardrooms and investors who can successfully navigate these issues”.
