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Although value did not reach the heights seen in the previous two years, growth in volume illustrated the resilience of the US M&A market in 2017. And with strong economic fundamentals, favorable tax reforms, a vibrant PE sector and the continued convergence between technology and other sectors, 2018 is set to match or better 2017.
Below are the four key factors that dealmakers need to be aware of in the year ahead:
Congress managed to sign a tax reform package into law at the close of 2017, and US businesses are awaiting substantial cash windfalls from significant reduction in the corporate tax rate and a "tax holiday" on overseas earnings repatriated back into the US. With corporates already sitting on large cash piles, investors will insist that the windfall be put to work, and M&A is likely to be high on many agendas.
Tech convergence conquers all
Expect the lines between sectors to continue to blur as companies in all industries spend on technology acquisitions, while technology companies set their sights on groups outside of their own space. The huge progress made in connectivity, data analytics and computer storage means that tech has become an essential part of any company's business model. Tech companies themselves, meanwhile, have become aware of how they can apply their platforms and software in "non-tech" industries.
Private equity's continued push
When faced with macro-economic uncertainty, corporates sitting on large cash piles always have the option of executing a share buyback or paying out a dividend rather than making a big bet on an M&A deal. Private equity firms have no such luxury, and have to keep investing come what may. With buyout firms sitting on record amounts of capital, they will become increasingly influential and competitive in M&A markets.
There is growing concern in M&A circles about the impact of antitrust enforcement on transactions. A number of deals in TMT and healthcare have fallen by the wayside in the face of interventions from antitrust regulators. Dealmakers will be watching developments in 2018 with interest, with CVS's purchase of Aetna in the healthcare sector expected to be one of the main bellwethers for M&A practitioners.
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