Earnings Call, Interview
M&A Outlook: How Companies Are Positioning For Growth
- Client appetite for larger transactions across corporate, private equity, and all sectors is expected to build and improve through the year, driven by a belief in sustained, above-trend global growth.
- M&A volumes are projected to remain at all-time highs with a continued desire to execute big and bolder moves as economies accelerate post-pandemic.
- Strong tailwinds for M&A activity include a focus on growth, supply chains, technology, and ESG, alongside abundant capital from private equity, sovereign funds, and SPACs.
- Boardroom dialogue on strategic transactions is anticipated to stay at record levels, with investors pushing for decisive action on the right deals.
- Significant recovery in big cross-border M&A, specifically transatlantic and Europe-to-Asia flows, is expected as travel restrictions ease, with pent-up cross-border focus continuing to pick up.
- Private equity-backed acquisitions and leveraged buyouts will be driven by aggressive new capital entry, characterized by tightened returns profiles, shorter investment cycles, and a surge in public-to-private transactions in Europe and the UK.
- The public-to-private trend in private equity is expected to extend to Asia over time, while the $500 million to $10 billion transaction category is forecast to remain very active throughout the fall.
- SPAC M&A activity is projected to continue at more moderate velocities than peak levels through the current and next year, with the European SPAC space continuing to build.
- Structured M&A, including spin-offs and divestitures, will persist as companies focus on portfolios and specific parts versus the core, while high-profile activist situations around mega-cap companies continue.
- Regulatory and fiscal shifts will require evolving approaches from market participants, though these issues are expected to be less relevant for activities outside the $500 million to $7 billion range.
- Tax and regulatory issues will remain considerations but are not expected to cause a fundamental change in the M&A landscape relative to history.
- ESG will remain a boardroom focus with shareholder support contingent on justified returns.
- The strong M&A outlook is contingent on fundamental drivers remaining stable, specifically the cost of capital, amount of capital, and shareholder support.