Conference Presentation, Panel, Other
The Global M&A Outlook
Milken InstituteDana Mattioli, Leon Kalvaria, Navid Mahmoodzadegan, James Sprayregen, Chris Stadler, John Waldron
- Total deal volume is projected to remain elevated across mid-sized and mega-cap sectors (exceeding $10 billion), reaching approximately 3.5 times the volume of the corresponding period last year, with activity expected to span TMT, natural resources, and additional industrial sectors throughout the year.
- The corporate tax rate reduction from 35% to 21% and a permissive regulatory environment under the current administration are anticipated to reduce friction costs and spur M&A activity, including a rise in bankruptcy-based deals and debt-to-equity conversions.
- Companies plan to reposition for growth over the next five to six years through asset sales, mergers, deconglomeration, and a focus on digital transformation, with CEOs targeting digital transactions as small as $200 million to avoid disruption.
- Shareholder pressure is expected to increase regarding specific capital allocation plans, driving activists to push for acquisitions, deconglomeration, or public-to-private transactions, potentially leading to a rise in hostile or raid activities.
- Approximately $1.7 to $1.8 trillion in private equity dry powder is expected to be deployed, while private capital is projected to hold businesses for 10 years or more, leading to an increasing share of private ownership and a potential wave of IPOs for high-quality companies.
- Low interest rates, global growth of 3% plus or minus, and capital availability are expected to empower CEOs to execute transactions despite regulatory unpredictability, though a 12 to 24-month merger process carries a risk of job loss for leaders if deals fail to materialize.
- Geographic deal flows are expected to shift, with Chinese deal volume continuing to decline while Japan and Saudi Arabia emerge as key markets seeking external growth and asset acquisition.
- Valuation dynamics are expected to favor corporate buyers who can pay significant premiums compared to private equity firms, while companies may pay up for assets and talent as alternatives to R&D and CapEx.
- Sectors such as healthcare, media, and retail are expected to see consolidation driven by a "domino theory" or service-based models involving "dark stores," alongside continued restructuring in energy and technology-disrupted industries.
- Corporate behavior is expected to become more PR-focused with an emphasis on jobs and nationalistic issues, avoiding aggressive cost-cutting to prevent political backlash, while synergy reinvestment will target growth rather than bottom-line reduction.
- Future performance of current deals will be evaluated ten years hence for real economic returns, and culture/governance due diligence will increasingly rely on employee sentiment found online.
- Material risks include potential global trade receptivity changes, higher volatility, and regulatory shocks that could invalidate current expectations of sustained high activity.