Global economic uncertainty and regulatory change will continue to impact M&A activity in the coming year, according to the latest trends insights by Clifford Chance.
Worries about sovereign debt, global economic slowdown and the continued lack of a resolution to the Eurozone crisis are contributing to an unsettled global picture. However M&A is continuing despite the challenging environment, and in some areas, Clifford Chance expects to see significantly more confidence in doing deals as the year progresses.
Matthew Layton, Global Head of Corporate at Clifford Chance, says: “The first half of last year showed that there is an appetite for companies to pursue M&A activity. This tailed off at the end of the year in correlation to events in the global economy. Once confidence returns, the fundamentals are certainly in place for M&A activity to increase significantly as we move through 2012 and into 2013. In particular there are significant cash reserves on corporate balance sheets in North America and Europe, and liquidity in PE funds seeking deal opportunities. Equally on the sell-side regulatory change will increasingly drive the need for continued consolidation in some sectors, particularly financial services.
“Relatively low valuations mean we could see more unsolicited transactions and innovative deal structures.
"What we are hoping for in 2012 is stability in the economic markets, and a decrease in geo-political risk, which will have the effect of encouraging buyers and sellers to re-engage in M&A discussions. Without these factors, there is unlikely to be any major uptick in general levels of activity and the current caution surrounding transformational, "bet the shop" deals will continue.
"Even if that is the case though, we anticipate a continued focus on cross border M&A and opportunities for increased activity around strategic alliances, asset swap deals and other transactions with lower risk, as well as spin-offs and deals arising from corporate debt restructurings and regulatory change."
Clifford Chance’s Insights into Global M&A Trends document is part of the Firm’s Global M&A Toolkit. The Toolkit comprises a growing collection of web-based transaction tools and in-depth analysis of the most important market and regulatory developments in M&A regimes across the globe. Coming soon on the Toolkit will be the Cross-Border Acquisition Guide for China, and a range of interactive M&A tools.
