德勤-开启并购新时代（英文）-2018.7-64页-6mb

Summary of the M&A Landscape in 2018

Core Content

The year 2018 marks a significant shift in the mergers and acquisitions (M&A) landscape, characterized by increased deal activity, heightened complexity, and the growing influence of shareholder activism and disruptive innovation. The M&A market is expected to remain active, driven by strategic imperatives, changes in the economic environment, and the impact of US tax reform.

Main Views and Key Information

Global M&A Activity

• Deal Volumes and Values: Global M&A deal volumes rose by 4% in 2017 to 49,612 deals, with a total value of $3.1 trillion. In the first four months of 2018, deal values reached nearly $1.7 trillion, the highest since 2007.
• Mega Deals: There is a potential for a new wave of mega-deals, as companies seek to capitalize on opportunities before the end of low interest rates and quantitative easing (QE).
• Cash Reserves: Non-financial firms in the S&P Global 1200 Index hold over $3.9 trillion in cash reserves, with private equity (PE) firms holding a record $1 trillion in investor funds.
• PE Influence: PE firms, representing over a seventh of the M&A market value, saw a 28% increase in deal value in 2017 to $467 billion. They are expected to drive significant M&A activity in 2018.

Strategic Drivers

• Shareholder Activism: Shareholder activism is on the rise, with 37% of activist campaigns targeting M&A or divestment. Over 21% of businesses divest assets due to shareholder pressure.
• Divestments: Divestment activities reached $472 billion in 2017, one of the highest since 2007. 70% of businesses expect to make at least one divestment in the next two years.
• Technology-Driven M&A: The pace of technological innovation is reshaping M&A strategies, with nearly 60% of disruptive technology acquisitions in 2017 done by non-tech firms.

Impact of US Tax Reform

• Tax Rate Reduction: The US corporate tax rate was reduced from 35% to 21%, significantly impacting M&A strategies. Lower capital gains taxes and immediate expensing of assets will encourage divestments and make companies more attractive for acquisition.
• Valuation and Financing: The tax changes may increase target company valuations, but also raise the cost of leveraged deals. PE firms and other debt-heavy companies face new challenges in tax deductibility, prompting a shift to alternative financing methods like preferred or convertible instruments.

Regional Trends

• Deal Multiples: PE deal multiples are rising, with Asia-Pacific at 28x earnings, North America at 25x, and Europe at 22x.
• Cross-Border Deals: Cross-border M&A activity has increased, with a notable 33% rise in the first quarter of 2018. However, uncertainty due to Brexit, trade tariffs, and capital controls may affect deal completion.
• Global Innovation Hotspots: The US, Israel, UK, France, Germany, India, China, and Japan are leading innovation investment through M&A and corporate venturing.

Sector-Specific Trends

• Technology, Media & Telecoms (TMT): TMT is a leading sector for M&A, with $99 billion invested in 2017, ahead of consumer business ($86 billion).
• Real Estate: Real estate saw a dramatic rise, with $73 billion in deals, driven by high payouts and tax benefits.
• Financial Services and Healthcare: Both sectors saw increased PE activity, with $62 billion and $33 billion invested respectively in 2017.
• IoT, Robotics, and AI: These sectors are experiencing substantial investment through M&A and corporate venturing. IoT had $98 billion in M&A deals and $3.5 billion in CVC investments during 2015-17. Robotics saw $7 billion in M&A and $1 billion in CVC investments, while AI had $22 billion in M&A and $7 billion in CVC investments.

Challenges and Considerations

• Regulatory Scrutiny: Increased regulatory involvement in sensitive deals may delay or complicate transactions.
• Integration and Divestment: Companies must focus on efficient integration and divestment processes, with TSAs being a critical tool.
• Uncertainty: Despite the growth in deal volumes, uncertainty surrounding economic conditions and regulatory environments may challenge the sustainability of M&A activity.

Conclusion

2018 is poised to be a pivotal year for M&A, marked by a surge in deal activity, the rise of shareholder activism, and the impact of US tax reforms. While there are clear strategic incentives for companies to engage in M&A and divestments, the complexity of the current environment, including regulatory changes and economic uncertainty, will require careful planning and execution to ensure success.