Global merger and acquisition activity is expected to moderate amid economic and political uncertainty with deal size likely to drop to $2.5 trillion this year from $2.8 trillion in 2016, says a report. Global M&A and IPO activity slowed in 2016 as factors such as volatility in the US stock market, growing concerns about China’s economic slowdown, and dropping oil and commodity prices caused dealmakers to become more cautious.
Those concerns were compounded by the UK’s vote to exit the European Union, and the US presidential election.
“We expect this environment of uncertainty to continue for at least the first quarter of this year, with M&A activity dropping to USD 2.5 trillion in 2017 from USD 2.8 trillion in 2016,” according to the Global Transactions Forecast by Baker McKenzie in association with Oxford Economics.
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Once greater clarity emerges, it expects global M&A activity to peak at $3 trillion in 2018.
It also said that the IPO activity is expected to show a modest rise in 2017 and bounce back in 2018 and 2019 as companies that had postponed their listings return to public markets.
“We forecast that global IPO activity will rise from USD 131 billion in 2016 to USD 168 billion in 2017, then peak at USD 275 billion in both 2018 and 2019,” the report said.
From a sector perspective, a key driver of global deals will be the tech sector, where M&A is forecast to reach USD 415 billion by 2018 – the highest since 2000.
“We expect a similar uptick in IPO activity led by Snapchat’s mooted IPO,” the report said, adding if Snapchat’s IPO is successful, it would be the largest US-listed technology offering since Alibaba Group’s IPO in 2014.
These forecast were based on the anticipation that the EU and UK officials make progress on establishing a new relationship in 2017 and and that the new US administration adopts a less protectionist stance on international trade and immigration policy, while setting out plans for fiscal stimulus, the report added.