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Opportunities in a Changing Landscape: Clifford Chance launches Global M&A Trends Report 2019

19 February 2019

Opportunities in a Changing Landscape: Clifford Chance launches Global M&A Trends Report 2019

In this year's report, Clifford Chance considers the global M&A market in 2019, a year where successful boards and investors will identify opportunity amid the challenges of trade tensions, political uncertainty and increasing regulatory scrutiny.

Guy Norman, Head of Clifford Chance's Global Corporate Practice explains:
“With falling GDP growth, the slowdown of China and rising global debt, companies are looking for new ways to defend market position or expand into new markets, including unlocking traditional asset classes for value, efficiency or stability.
“Fragmented political and economic responses to global challenges are creating greater complexity in trade and investment, but also opportunities for boardrooms and investors who can successfully navigate these issues.”

Although global M&A activity in 2018 saw a slight drop-off (-3%) in the number of deals compared with 2017, there was an increase (+12%) in global value to US$ 3.5tn. Highlights included:

  • M&A increased in value across all major regions. The largest increases were in North America (+14%), Europe (+17%) and the Middle East/Africa (+10%). The most popular sectors were TMT and Energy/Mining/Utilities;
  • Cross border M&A comprised 38% of total M&A globally. The largest cross-regional M&A investment flows in 2018 were from North America into Europe (US$ 238bn) and Asia-Pacific into Europe (US$213bn, a 222% increase).

In the report, Clifford Chance M&A experts consider four major themes and their impact on the global deals market in 2019.

1. Digital borders
Technology and data now play a central role in deals, especially when they become the focus of trade and political disputes. With many governments beginning to more strictly regulate cyberspace and data use, geographic considerations are now central to how companies structure their operations and enter new markets.
Concern over digital borders is growing, and there are early signs of a push towards global rules governing e-commerce and cross-border data flows.
Jennifer Mbaluto, Tech Group Senior Associate and Co-Head of East Africa at Clifford Chance, said:
“In 2019, digital borders are the frontlines of the world’s defining geopolitical rivalries. Understanding and anticipating how they work is key to successful deals.”

2. Intellectual property in M&A
Intellectual property assets are increasingly leveraged for value and used as a negotiating tool in deals. The rise of data as an asset class means that some of the most exciting deals today involve IP-rich businesses. The report shows how these must be handled with care, citing examples of downside risk, as well as highlighting routes to success.
Ling Ho, Clifford Chance IP partner, Hong Kong, said:
“We are seeing more tactical ways of mobilising IP to engineer, structure and control a deal. Putting pressure on a business to get and test the best price, or take pole position in a competitive sale, can be a highly effective strategy.”

3. Real assets
Unprecedented levels of fundraising flowing to infrastructure, energy and real estate demonstrate the continued appeal of ‘real assets' that offer predictable returns in an uncertain world. As demand outpaces supply in developed markets, high valuations are forcing investors to increase their risk appetite.
Thais Garcia, M&A Partner, New York, said:
"Amid trade restrictions and talk of fragmentation, a more consistent global language for real asset deals is emerging as investors broaden their horizons."

4. Strategic partnerships
Innovative and strategic partnerships are a notable feature of today’s deal landscape. As a less capital-intensive complement to traditional M&A, such combinations allow companies to pool expertise and share costs to defend market position, or to expand into new markets and technologies.
Clarity of purpose and planning are essential when entering such arrangements, and the report contains practical tips to ensure management of regulatory risk, security of IP, balance of governance rights and incentivisation of key stakeholders.
Dessislava Savova, Clifford Chance Head of Consumer Goods and Retail sector, Paris, said:
“Increasing interest in alliances is not limited to cost reduction. They can enable partners to broaden geographic influence, share expertise and access disruptive digital technologies.”