M&A rebound predicted

BY Richard Summerfield

For a number of reasons, the first half of 2017 saw fairly constrained levels of M&A activity, according to a new report from Clifford Chance. However, despite this relative paucity, a flurry of M&A activity in the final half of the year could be on the way.

The report, 'A Global Shift: September 2017', cites a 42 percent drop in outbound Chinese dealmaking, increased antitrust deal scrutiny and a ‘wait and see’ approach being adopted by many multinationals in the face of heightening global geopolitical chaos as the largest roadblocks holding up progress in H1 2017.

Chinese restrictions on capital outflows, designed to limit “irrational” acquisitions overseas in certain industries including real estate, hotels, movie studios, entertainment and sports clubs, were announced in August as the government published outbound investment guidelines. These guidelines have had a butterfly effect in overseas markets where sellers have become increasingly wary of Chinese bidders and their ability to close transactions. As a result, there has been a sharp decrease in Chinese outbound activity.

Heightened antitrust concerns in certain key markets have been equally damaging. With competition authorities in Europe and Asia toughening their stance on dealmaking, particularly when there is a large data element to deals. There has been a focus on procedural infringements throughout 2017 with authorities increasingly willing to levy significant fines.

“Globally, we are seeing increasing proliferation of inconsistent merger control procedures and greater scrutiny of foreign takeovers on non-competition grounds. Navigating these complexities requires careful planning, understanding of local sensitivities and early identification of remedies,” said Nelson Jung, an antitrust partner at Clifford Chance.

However, there are reasons to be cheerful. An overabundance of dry powder in the private equity industry is driving activity as investors look to capitalise on the upheaval caused by global geopolitical uncertainty.

There are also a number of surging industries. The consumer, retail and leisure sector has seen considerable activity, with larger deals driving a 9 percent rise in the industry's share of dealmaking compared to 2016. The real estate and healthcare industries also recorded a notable uptick.

US M&A in the first half of the year is more or less flat from H1 2016; however, M&A activity in Europe has been healthy, with an 8 percent increase compared to H2 2016. Europe has benefited from investment from the US, as well as intra-European investment.

Report: A Global Shift: September 2017

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