I am a very positive, ‘glass half full’ person. However, even I have found it difficult to be upbeat at certain times during the last 12 months. Extraordinary and unprecedented events have found me shaking or scratching my head – be it new terrorist atrocities, decisions by so called sophisticated democracies or even goings on in sport (my go to distraction). I am really pleased to report though that at Peregrine Law we are full of optimism for the M&A market in 2017 and that’s why we’ve set up this challenger law firm in London and why we are busy recruiting quality international M&A lawyers.
Here are the reasons why we are so excited about increased corporate activity in 2017 in the UK and globally, particularly in our sweet spot, being the smaller ticket, cross border market.
- Confidence – as the FT wrote on 29 December 2016, ‘Confidence leads to dealmaking’ but ‘2016 was the year that upended this wisdom, as no amount of uncertainty seemed capable of stopping the boom in global takeovers.’ Well, we feel that the old adage will apply again this year as some certainty will return and decision makers will at least try and appear outwardly confident and want their businesses to project the same positivity.
- Continued globalisation – some might be railing against it, but we predict that businesses will continue to expand their geographic reach throughout 2017.
- Pipelines and targets – our recent soundings have led us to agree with EY who wrote ‘Larger deal pipelines support a forecast of an uptick in M&A activity. Executives report a big increase in the number of potential targets they are reviewing’ in the 15th and latest edition of their Global Capital Confidence Barometer.
- Buying innovation – some corporates will inevitably try and keep up with changing customer demand and new technology by buying innovation. Good news for start ups looking for a quick exit.
- Chasing growth – company executives will be under more and more pressure from their investors to find growth this year leading to greater deal doing.
- Cash piles and chasing yield – capital has been sitting on the sidelines for a while and there’s lots of it. It’s time to invest it.
- Low interest rates – it’s still very cheap to borrow so, mixed with the cash mentioned above, if the business case is there then funding the acquisitions shouldn’t be a problem.
And what part of the market will be the hottest:
- Asian investment into Europe – this will include Chinese investment into the UK spurred on by the cheap £ and the UK government trying to promote business investment.
- Smaller deal sizes – we think boards will find it easier to convince shareholders to approve multiple smaller deals than a transformative one this year. Part of regaining confidence in the market.
- Consumer goods, tech and oil & gas – there remains plenty of opportunity in these sectors and we predict plenty of activity here.