Global law firm White & Case LLP today released the results of its Global M&A Sentiment Tracker, a global survey of 800 senior M&A executives in a wide variety of sectors. The survey, which was conducted in the US, Europe, Asia-Pacific and Latin America in the fourth quarter of 2019 (before the beginning of the coronavirus crisis), found that dealmakers across the globe are optimistic about the outlook for M&A activity in the coming year, with 86 percent of respondents saying they expect M&A activity to increase in their region in 2020.
"As the world focuses on the spread of the coronavirus, dealmakers’ appetite for M&A may pause and the inevitable economic downturn may happen sooner than expected,” said John Reiss, Global Head of M&A at White & Case. “We expect that companies that were already struggling will probably feel it the most."
The survey found that 50 percent of dealmakers said they plan to lean into a downturn, particularly if valuations come down as a result.
Reiss noted: "Once dealmakers feel they can evaluate the market impact of the virus and the situation has stabilized, it's likely that we’ll see renewed enthusiasm and M&A executives are likely to lean in."
A key factor for dealmaker confidence is a healthy financing environment, which respondents ranked as the most important driver of M&A in 2020, and 66 percent said they expect financing options to get better over the next year.
The survey also found that trade and national security policies have created pent-up demand for cross-border deals, with 76 percent of respondents saying they expect to carry out at least one cross-border deal in the next year and 80 percent expect to increase cross-border dealmaking in 2020.
Other important survey highlights:
- Shareholder activism has helped transform how companies think about M&A strategy
- Seventy-eight percent say shareholder activism will be a major driver of M&A
- Ninety-five percent said that activism has an impact on their M&A strategy
- The digital revolution could fuel “shadow protectionism”
- Respondents rank "the need to acquire a new technology" as the second most important driver of M&A in 2020, behind "a healthy financing environment"
- Sixty-five percent are looking to acquire or merge to enhance their technology capabilities in the next year
- The United States:
- Forty-nine percent of respondents in the US say activism has a significant impact on their M&A strategies
- Eighteen percent of non-US executives say they’ll be looking to do cross-border acquisitions in the US this year
- In particular, The Committee on Foreign Investment in the United States (CFIUS) continues to have a profound effect on Chinese companies that are interested in investing in the US, creating tremendous pent-up demand
- Forty-five percent of respondents in Europe say activism has a significant impact on their M&A strategies
- Germany and France are leading the way in Europe for implementing rigorous policies for evaluating foreign investments on national security grounds
- Our data suggests that Brexit has created pent-up demand for UK assets, having caused eager buyers to wait and see how the situation develops
- The UK ranked number one on the list of targets for cross-border acquisitions, with 33 percent of non-UK executives saying they’ll be looking to do deals in the UK this year
- o Eighty-six percent of respondents in China said that they expect to carry out at least one cross-border deal in the next year
- o Forty-two percent of respondents across Asia-Pacific, including 59 percent in China, say activism has a significant impact on their M&A strategies
- o Twenty-three percent of non-Chinese executives say they’ll be looking to do cross-border deals in China this year
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