Tuesday 21 November 2017

Value of M&A deals to surge to $22bn as confidence returns

Baker McKenzie's global chairman Paul Rawlinson
Baker McKenzie's global chairman Paul Rawlinson
Colm Kelpie

Colm Kelpie

The value of cross-border merger and acquisition (M&A) transactions in Ireland next year is expected to surge to more than $20bn (€17.1bn), according to analysis by global law firm Baker McKenzie.

M&A deals in Ireland this year fell to a low of just over $4bn (€3.4bn) amid global political uncertainty, according to its global transactions report.

It is the first time the forecast has a specific focus on Ireland.

Globally, the easing of key economic and political risks and the emergence of positive macroeconomic deal drivers will accelerate deal activity in 2018, the report stated.

Baker McKenzie described 2017 as a period of "apprehension for global dealmakers", which it argued was clearly visible in Ireland, when M&A transactions fell to a low of $4.2bn (€3.6bn). But following some momentum in the second half of 2017, the firm predicts a peak in developed markets across the world in 2018, with M&A deals in Ireland soaring to $22.3bn (€19.1bn).

"After a few soft patches in 2017 we have a more optimistic outlook for the global economy and deal making in 2018, as long as the brakes are not put any further on global free trade," said Paul Rawlinson, Baker McKenzie's global chairman.

"We see an uplift in both M&A and IPO activity as dealmakers and investors gain greater confidence in the business prospects of acquisition targets and newly listed businesses.

"However, it's not a done deal, with the threat of a hard Brexit and a Nafta collapse both still very real. Business will need to continue to make the case for liberal trade and investment frameworks."

The value of mergers and acquisitions globally dropped slightly in the third quarter of 2017, as big deals worth more than $10bn (€8.5bn) were scarce given uncertainty about economic policy in the US and Europe in particular.

Even as major stock markets continued to climb higher, big companies were wary of pursuing transformative deals, as the future of US President Donald Trump's agenda on taxes, healthcare and infrastructure spending remained unclear, while Britain's Brexit talks, and North Korea's nuclear ambitions also weighed on chief executives' appetite to take risks.

Although the value of deals were much smaller in Ireland this year, the volume, at 141, is greater than the 125 predicted for 2018.

The value of global merger and acquisitions globally slipped to $765bn (€655bn) in the third quarter, down 5pc year-on-year and the lowest third-quarter level since 2013, according to preliminary Thomson Reuters data released in September.

The Baker McKenzie report also looks at deals up until 2020. Each country is also ranked using an 'attractiveness indicator' - calculated using a weighted average of 10 factors including money supply, business regulation, and ease of doing business.

Out of the 40 countries Baker McKenzie analysed, Ireland came out as the seventh most attractive country for investment, ahead of major global financial centres including the UK, Germany and the US.

"Ireland continues to be one of the strongest performers in Europe for transactional activity, despite the current climate of geopolitical uncertainty brought about by Brexit and the US presidential election," said Tim Gee, M&A partner at Baker McKenzie.

"We expect 2018 to be a significant year for cross-border M&A transactions in Ireland, as investor apprehension turns to appetite, and protectionist rhetoric in some major markets could further boost the attractiveness of Ireland as an investment destination."

The law firm forecasts M&A transactions will drop to $14.9bn (€12.7bn) in 2019 and $8.7bn (€7.4bn) in 2020. The highest number in recent years was $55.8bn (€47.8bn) in 2015.

Irish Independent

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