2017 ended with surprising confidence in a rebounding market. Here we ask the City’s leading corporate players for their prognosis on 2018
Finding the edge
‘We have come back from the holidays to a whirlwind of deal activity. I’m expecting to see financial investors looking to reduce the competition on deals by pursuing transactions where only a limited number can compete. For example, I expect the large-cap financial investors will look for multibillion-enterprise-value businesses to acquire either on their own or as part of a consortium. Also, financial investors will look to specialise further in certain key sectors so that they can differentiate from their competitors and create that all important auction-winning angle.’
Adrian Maguire, co-head of global financial investors group, Freshfields Bruckhaus Deringer
Out with the old
‘There have been various clouds overhanging the M&A market in recent years, although the general trend has been strong and we see that continuing. Technological innovation is continuing to drive deals across almost all sectors. We are seeing significant volumes of corporate venturing as well as old-economy businesses acquire or take strategic shareholdings in their technology-based competitors. It can be hard for established, large businesses to innovate and M&A is an obvious solution for many of them.’
Jon Kenworthy, M&A group co-chair, DLA Piper
‘2018 started with a bang: a number of big transactions have been announced and there is more in the pipeline.’
David Avery-Gee, Linklaters
No pause for breath
‘It was the busiest December I can ever remember, but we see that very strong end to 2017 continuing into the beginning of 2018. The global economic environment is still very favourable, corporates have a lot of cash, private equity’s got a lot of money and the credit’s still there – putting aside the geopolitical risks. Another big driver of deals is the challenge of technological disruption and business transformation, but equity markets are priced for no surprises. The year should start strong, continue pretty strong, but as for the outer end of the forecast, how long can the bull market keep going?’
Richard Moulton, head of corporate, Eversheds Sutherland
Unholy trinity
‘The market’s doing probably better than expected given the uncertainty that was there 12 months ago. It’s difficult to pin down why, but the markets are reasonably robust and there’s some good deal values coming through. I’m confident deal volumes will remain strong for the balance of 2018. I’d be hesitant to say that they’d increase. It’s the trinity of economic, political and regulatory uncertainty that’s around – that’s what drives the caution.’
John Tyerman, head of corporate UK, Pinsent Masons
Great expectations
‘The UK M&A market was much healthier in 2017 than I had expected following the June 2016 referendum decision. Sterling’s weakness certainly helped to attract foreign buyers, but there was also plenty of outbound M&A and domestic M&A was also busy.
I expect activity to remain healthy in 2018, with defensive mergers to continue across the piece. The fall in consumer confidence may lead to a spike in deals in the consumer retail space and there may be other sectors where trading conditions are tougher, leading to consolidation.’
David Patient, managing partner, Travers Smith
Back with a bang
‘2018 seems to have started with a bang: over the first few weeks of the year a number of big transactions have been announced and there is more in the pipeline.
For some it is a matter of opportunism because things are cheaper; for others it’s defensive – it’s: “Let’s put ourselves together because together we are stronger.” The hottest sectors are tech, real estate, industrials, and probably oil and gas – oil prices are recovering a little bit, so we’ll see a little more activity.’
David Avery-Gee (pictured, top), partner, Linklaters
Stay positive
‘The economic outlook is positive. Tech and real estate are still very strong areas, infrastructure is strong, although who knows what impact the Carillion collapse will have. But the stock market is strong and this helps listed companies. Interest rates are still low and that is positive in terms of borrowings.’
Iain Newman, co-head of corporate, CMS Cameron McKenna Nabarro Olswang
‘The trinity of economic, political and regulatory uncertainty drives the caution.’
John Tyerman, Pinsent Masons
Most sectors active
‘I had four active deals landing on my desk on Christmas Eve – that was not the case last year. A lot of sectors are active: financial services, energy and life sciences. Tech was down a bit last year, compared to the bumper year before, but it is hard to see how it will not continue to be key. I have seen more consortium-type deals and it will be interesting to see how that carries on.’
Ben Higson, London head of corporate, Hogan Lovells
Money needs to be spent
‘The pipeline is looking healthy and there are some chunky deals in the market. I am confident: a huge amount of private equity money has been raised, which needs to be spent, and we will certainly see more activity in the fintech space. We will see more examples of PE teaming up with trade buyers, particularly on some of the larger carve-out deals.’
David Walker, global co-chair – private equity, Latham & Watkins