Growth beats protectionism as M&A deals stay strong

Corporate merger and acquisition (M&A) activity remained healthy in the first half of 2017 despite protectionism and greater government intervention, reports EY.

The accountancy group reports that global M&A deal values totalled US$1.4 trillion (£1.1 trillion) in the first half of 2017, which it said represented a “modest decline” of 4% on H1 2016.

EY suggested that the drop reflected fewer mega-deals valued at more than $10bn in the first six months of 2017, partly offset by a 4% rise in the number of deals agreed from 17,642 to 18,363.

“Geopolitical shifts and rising nationalism has brought additional M&A complexity, but companies are overcoming those barriers,” commented Steve Ivermee, managing partner of UK and Ireland transaction advisory services at EY.

“Growth remains the number one priority, and M&A is a route to achieve that. However, given the changing environment, dealmakers may need a broader narrative around purpose and the concept of inclusive growth to keep all stakeholders onside.”

EY predicts that private equity (PE) firms will be major drivers of the M&A market over the year ahead, marking the industry’s recovery from the global financial crisis.

The group reports that PE funds have $570bn of cash allocated to buyout funds, significantly more than the total of $478bn available in 2007-08 when the crisis broke.

In the first half of 2017, PE funds acquired $124bn of assets, a 14% rise year-on-year.

EY also reported that despite the uncertainty created since the Brexit vote in June 2016, UK M&A deal activity “remains very robust”, with a “significant boost in outbound M&A offsetting a drop in inbound deal value”.

“The UK’s involvement in global M&A points to UK companies continuing to look abroad for deals and being attractive for inbound acquirers,” said Ivermee.

“The outlook for the UK economy and UK’s trading relationships may be uncertain, but many UK companies possess qualities, such as a focus on innovation and global presence, that will continue to make them attractive.”

While a decline in the value of the pound made UK firms more attractive to overseas buyers inbound deals in H1 2017 actually fell to $28.3bn, while UK companies adopted a more aggressive stance on acquiring foreign businesses, spending $38.9bn across 341 deals.

30 views

Related reading