BY Richard Summerfield
Merger and acquisition activity will increase in 2018 as global dealmakers recover their appetite for investments, according to Baker McKenzie’s 'Global Transactions Forecast 2018'.
As economic and political concerns subside, global M&A activity is expected to climb to around $3.2 trillion next year, with an increase in both M&A and IPO activity. The momentum created in the second half of 2017, as economic growth began to pick up in certain key markets, will roll over into 2018.
M&A activity in the consumer goods and finance industries will continue to generate the highest total deal values in 2018, the report suggests. The pharmaceutical and healthcare and technology and telecom sectors are also expected to rebound from a disappointing 2017 in which M&A activity is on course to slip to $2.5 trillion from $2.8 trillion last year.
“After a few soft patches in 2017 we have a more optimistic outlook for the global economy and dealmaking in 2018, as long as the brakes are not put any further on global free trade. 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,” said Paul Rawlinson, global chair of Baker McKenzie. “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.”
Global head of M&A at Baker McKenzie, Michael DeFranco, said, “2017 played out as we predicted and there have been a number of positive developments in the global economy that have led to the forecast for global M&A values in 2018 to be increased from our previous forecast of US$3 trillion to US$3.2 trillion. This would represent the 3rd highest yearly deal value since 2001 and the 2nd highest since the financial crisis in 2008.”
China's predicted GDP growth for 2018 has been revised from 5.9 to 6.2 percent. The European GDP growth forecast has also been revised for 2018, up to 1.9 percent from 1.6 percent.
Beyond 2018, the report predicts that M&A values will drop to $2.9 trillion in 2019 and $2.4 trillion in 2020.