Clifford Chance

Positive outlook for Global M&A in 2014

The steady increase in global M&A activity will continue into 2014 as the world economy strengthens and confidence returns to the boardroom, according to a preview of the findings from Clifford Chance’s latest Global M&A Trends report.

While global M&A in the first 11 months of 2013 is broadly flat year-on-year (US$1.87 trillion in 2013 - up from US$1.86 trillion from the equivalent period in 2012*) consistent quarterly increases in global M&A activity values show positive momentum which Clifford Chance anticipates will be sustained into the new year and beyond.

The Firm’s Global M&A Trends report analyses Mergermarket data and the Firm's market intelligence to review trends and provide insights into global M&A activity.  The report draws on the firm's geographical, sector and M&A experience to deliver insights into future M&A developments. A preview report which launched yesterday includes data from the first 11 months of 2013. The full report will be available in January 2014.

Whilst dealmakers this year have once again been targeting opportunities in emerging markets - M&A activity in Africa and the Middle East increased 55% year-on-year - a rebalancing in 2014 is expected as the developed markets of Europe and the US come back into favour with global M&A participants. Certain countries, including Spain, could become M&A “hot-spots” as foreign investors, particularly private equity, are attracted to distressed debt and undervalued assets in recovering economies.

Patrick Sarch, Corporate Partner at Clifford Chance, commented:

“All the signs point to a slow and steady recovery in the global M&A market in 2014. Developed economies are strengthening, finance is readily available and confidence is growing. 

“Behind the scenes we are seeing renewed interest in M&A opportunities in developed markets. Europe in particular will come back into favour as acquirers seek to secure technology, skills and established brands at attractive valuations. We are seeing a good pipeline of deals for early in the new year and, short of any major shocks, the UK market is expected to be increasingly buoyant as we move into 2014.”

Michael Dakin, Debt Capital Markets Partner at Clifford Chance, added:

“The availability of relatively cheap debt, in the high yield market in particular, will continue to stoke M&A activity in 2014 with yield-hungry investors willing to provide finance. We also expect there to be an increase in the use of bonds to finance alternative deal structures, such as minority stakes.”

Snapshot of 2013 activity

• The US M&A market continues to prove resilient with deals totalling US$ 761.3bn in 2013 to date, an increase of 14% on the same period in 2012. Japanese M&A continues to decline (deal value down 36%).
• Cross-border M&A remains robust, with cross-border deals totalling US$ 649.9bn (35% of M&A deal value) in 2013 to date. Inter-regional M&A comprises 22% of total M&A activity.
• TMT has been the best performing sector for 2013 with 25% of total M&A global deal value. It is the only sector to have experienced a significant increase compared to last year.
• In Europe, private equity activity levels remain subdued, although there is an increasing focus in Southern Europe. However, near-record levels of uninvested ‘dry powder’ are likely to drive activity. US buyout activity is currently on course for its highest yearly deal value since the onset of the financial crisis.

Clifford Chance's Global M&A Trends report is part of the Firm's Global M&A Toolkit (see www.cliffordchance.com/GlobalM&AToolkit). The toolkit comprises a growing collection of web-based transaction tools, video content and in-depth analysis of the most important market and regulatory developments in M&A regimes across the globe. 

*Provided by Remark, taken from mergermarket.com