Three trends set the stage for global M&A in 2018

We look at the major trends driving global M&A through 2017 and into 2018: resurgence in the energy sector, resilience among UK dealmakers and an increasing appetite for overseas acquisitions by US firms

The value of global M&A activity in 2017 was down slightly compared to 2016, continuing at a less frenetic pace than in 2015, a record breaker. The number of deals was also down, remaining just below the record set for volume in 2016.

A total of 18,490 deals worth US$3.16 trillion were announced during the year, a 3 percent decrease in value and a 1 percent decrease volume from 2016.

However, despite a slight dip in dealmaking—certainly by comparison to the banner year of 2015—M&A remains a crucial tool to companies around the world. We observe three major trends that moved the M&A needle in 2017.

Energy is the most active sector for M&A 

Energy, mining & utilities overtook technology, media and telecommunications to top the sector chart in 2017, with US$543.63 billion spent on 1,552 deals over the year. The need to restructure in a challenging investment climate continued to generate top-end deals in 2017. Oneok Inc.'s US$17.2 billion purchase of a 60 percent stake in Oneok Partners and Williams Companies' US$11.4 billion acquisition of a 32 percent stake in Williams Partners are prime examples of the need to reduce debt and repair balance sheets.

There are signs that a more positive indicator will drive activity in 2018—namely, the recovery in the price of oil, which ended 2017 on a 30-month high (around US$60 per barrel). The outlook remains optimistic for 2018, with the Energy Information Administration predicting crude oil prices will average US$57 per barrel this year.

UK targets drive European M&A

UK dealmakers have appeared to put Brexit fears behind them. Despite uncertainties over the UK’s status as a financial hub and its trading relations with its EU neighbors, the UK was the most targeted country in Europe in 2017. A total of 675 deals worth US$127.23 billion targeted UK firms during the year. This was the third-highest year for value (after 2015 and 2016) since the economic crisis, which indicates buyers remain optimistic about UK assets.

And the outlook for outbound deals from the UK looks bright for 2018. According to a report from consultancy firm EY released in November, 60 percent of British companies are planning acquisitions in the course of 2018, a 9 percent rise on the previous April.

US firms double down on overseas acquisitions

Strong economic indicators at home have caused US firms to remain confident when acquiring abroad. This consistent drive for outbound deals was demonstrated in record-breaking deal figures in 2017. A total of US$340.8 billion spent across 1,330 deals marked a 20 percent increase in value compared to 2016.

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