Panel
The Global M&A Outlook
Milken InstituteKate Kelly, John Huwiler, Leon Kalvaria, Steve Krouskos, Virginie Morgon, Greg Weinberger
- Market activity is expected to face hesitation and a pause for large transactions and mega-deals until political issues, tax policy, healthcare costs, regulatory rulings, and currency exchanges stabilize, with a specific slowdown anticipated around elections similar to the Brexit sequence.
- Despite current uncertainty, 64% of C-suite executives believe the economy is improving, 56% of clients plan to transact within the next 12 months, and robust activity is projected for deals under $5 billion absent unforeseen shocks.
- A "wet blanket" of regulation removal and benign regulatory environments are predicted to drive several years of record M&A volumes and elevated equity values once tax policy and costs are settled.
- Technology and the fourth industrial revolution will persist as primary deal drivers across all sectors, including automotive, consumer, life sciences, industrial products, and agriculture, regardless of political conditions.
- Investors are advised to adopt a more global approach and establish U.S. presence to compete, while Chinese outbound M&A faces significant constraints due to capital controls, though selected state-owned enterprises may continue consolidating in super-strategic industries.
- The energy sector is forecast to undergo a seismic shift focusing on shale in the Permian as conventional resources are squeezed, with transaction activity likely concentrated in the $1 billion to $10 billion range.
- Strategic owners are expected to sell non-core assets while prioritizing cash reuse for strategic acquisitions over dividends, and private equity firms will likely fuel activity by acquiring under-managed assets as businesses shift focus from efficiency to transformation and platform builds.
- Corporate activism and "constructive capitalism" are anticipated to intensify, with investors proactively managing portfolios, engaging directly with management alongside hedge funds, and achieving high success rates due to well-informed analysis.
- Cross-border transactions will face heightened scrutiny regarding jobs, defense, and economic harm, with CFIUS regulations potentially expanding to cover food security and reciprocity, which may dampen inbound activity into the U.S.
- Specific policy changes, such as a 15% corporate tax rate, limited interest deductibility, or border-adjusted taxes, will likely compel structural adjustments, impact financing for highly levered transactions, and create complex valuation scenarios.
- The mobility sector, covering insurance, finance, and self-driving cars, is identified as a key area for M&A interest in the coming year, while biotech deals will continue to focus on acquiring research to fill business gaps.
- While pent-up demand exists, very large transactions involving financial sponsor club deals over $5 billion are unlikely to return soon due to current multiples and operational risks, and long-only investors will likely continue co-investing as a prevailing phenomenon.
- Companies with unique strategic opportunities may proceed without waiting for total uncertainty resolution, but most will factor in aggressive growth rates to justify transactions rather than relying solely on cost-cutting.
- The antitrust environment will remain tough with a peak in withdrawn deals unlikely over the next four years, though outcomes for specific high-profile deals like Time Warner and AT&T remain uncertain pending the new regulatory team's stance.