What does 2017 have in store for mergers and acquisitions activity around the world? Political transition across different regions, combined with global economic forces, could subdue M&A activity this year. Grappling with regulatory issues could dissuade investors from larger deals,…
What does 2017 have in store for mergers and acquisitions activity around the world?
Political transition across different regions, combined with global economic forces, could subdue M&A activity this year. Grappling with regulatory issues could dissuade investors from larger deals, and set 2017 back a notch from last year – which was one of the more successful years for M&A activity since the recession. On the other hand, interest rates continue to stay favourable and sectors like telecom, media and tech might continue their winning streak well into 2017. With 2016 claiming over 4000 mergers, the environment has remained conducive for further activity in 2017.
Tech continues to remain in the spotlight
In 2016, M&A activity in tech rose to an all-time high, reported professional services firm, EY. That momentum, is strong enough to remain intact in 2017, provided investors continue to show an interest in Artificial Intelligence and IoT. Deals within the IoT space last year, garnered close to $103.4 billion in value, with most investments flowing in the direction of connected-car technologies. Technology in healthcare is also evolving rapidly. With the pressure that the healthcare sector has been experiencing in the United States, innovation in health-tech is a likely outcome, with potential for not only growth, but also for M&A activity.
Businesses are facing increasing pressure from a competitive market, as well as shareholders, to remain relevant in a swiftly evolving, digital landscape. Technological advancement is sure to be a significant catalyst in driving deal-making over the course of 2017.
Could regulatory uncertainty put a damper on M&A activity?
Given the current geopolitical climate, and low confidence in regulatory measures, companies may be cautious in pursuing large deals, with a complex, or time consuming path to completion. According to a recent survey in this regard, by US-based Mergermarket, 40% of the respondents believed political upheaval in Europe, USA and the Middle East may hinder deal-making in 2017.
While the deal-making process could take more time, especially with larger deals, companies will steadily but surely continue to work within different political environments. Dow Chemical and DuPont recently managed to gain the European Union’s approval for their $77 billion merger, overcoming regulators’ concerns with concessions such as the sale of certain sections of DuPont’s pesticide business.
Multinationals such as Bayer, which recently acquired Monsanto, have also attempted to gain a foothold in the US market.
Cross-border deal-making could play an important role in value creation
Amazon just made its foray into the Middle Eastern market with its acquisition of Souq.com. The website, often referred to as the ‘Amazon of the Middle East’, is an English and Arabic e-commerce platform. It is said to be the largest e-commerce platform in the Arab world, covering a population of about 50 million across several countries.
For companies looking for strategic growth, exploring opportunities in newer geographies could prove profitable, especially within some of the fast developing economies in Asia.
According to a report published by JP Morgan, cross-border transactions would be one of the key themes playing out in global M&A this year.