The impact of the vote to leave the EU and the election of Donald Trump in the US has caused a reduction in mergers and acquisitions this year but activity will still grow over the next four years.
The sudden boom in activity over the last quarter of 2016 made it the second-best year for dealmakers since the financial crisis of 2008.
A report from Baker Mckenzie shows:
“In the UK, it expects a ‘sharp drop’ in immediate activity. According to the report, M&A values will fall to £102bn in 2017, down 63% from £279bn in 2016. It expects this figure to rise moderately to £123bn by 2020”.
Foreign companies have jumped at the chance to buy British businesses with the sterling’s devaluation against the US dollar, however UK companies should be in a good position to attempt acquisitions of their own and the capacity of UK firms to acquire other companies will rise by 22% over the next year.
The year so far has seen a few large acquisitions take place, most notably Johnson and Johnson acquiring Europe’s largest healthcare firm in a $31.3bn transaction and Japan’s Softbank buying the UK’s largest technology firm Arm for £25bn.
Volatile environments are not an ideal breeding ground for large-scale transactions, particularly those which comprise a high level of risk. However, change often uncovers opportunity and a number of businesses are poised to seize any opening that may arise.