M&A value steady in volatile times

Market uncertainty and political shocks did not phase dealmakers in 2016

The global M&A market in 2016 proved its resilience in the face of an uncertain political and economic climate. At US$3.27 trillion, global deal value is higher than all years since 2007 except 2015, according to Mergermarket data. It is a similar story for volume, which, at 17,414 deals, was down on the previous two years but up on all other years post-2006.

M&A activity in 2016 faced considerable headwinds in the form of political uncertainty, increased regulatory scrutiny of deals, a challenging price environment in the oil & gas sector and, most recently, increasing controls on cash outflows from China. So it is understandable that deal activity was subdued compared to the record-breaking 2015 level, but quite remarkable that global M&A activity remained at a relatively high overall level. However, with a strengthening US economy continuing to provide a safe haven for investors, corporate coffers still bulging and readily available credit, the robust value figures demonstrate that dealmakers are willing to pay a premium for the right strategic targets. 

Key drivers for M&A value this year included a rash of megadeals, unprecedented outbound activity from major Asian corporates searching for growth and the need for businesses to generate efficiencies to compete in a digital world.

With the latter at the forefront of many dealmakers’ minds, the top sector in 2016 was telecommunications, media and technology (TMT) with US$697.8 billion worth of deals, making up 21.4 percent of total value. The next highest was energy, mining and utilities, with 18.8 percent market share. 

With a new US administration publicly focused on reducing regulatory roadblocks and growing the US economy, we expect 2017 to be another strong year for M&A. But other challenges still remain, such as continuing political uncertainty in Europe, Chinese exchange controls and an increasing interest rate environment.

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