Global M&A Market Resilient Through Economic Downturn
The global M&A market has proven to be much more resilient than expected in this economic downturn, according to a recent study and analysis by McKinsey. The market has contracted in ways that signal a correction rather than a true reduction in activity. Compared with previous economic downturns, the trends in the current M&A market have changed but remain strong, McKinsey says.
Much of the continued strength comes from restructuring transactions generated by the crisis such as government-sponsored and financial-institution deals. Other trends observed and predicted in the current market are:
- Global M&A: Since 2001, truly international M&A deals have become the norm. Cross-border deals now make up nearly 35% of total M&A value, a 12% increase in the past seven years.
- Restructuring: Megadeals have changed in focus. These $10 billion deals have changed from industry concentration towards restructuring.
- Hostile Bids: Surprisingly the trend of hostile activity signifying market confidence remained high well into 2008. Total value has contracted but the incidence of hostile activity remains high.
- Private Equity: This is the largest trend change in the M&A market. In the current downturn, private equity deals have declined 72% from an all-time high a year ago.
McKinsey predicts that these themes will continue to persist through 2009 and beyond. Although the M&A market has contracted, it continues to hold steady at 2007 total value levels.
The next few years will present considerable opportunities for ambitious and disciplined acquirers.
“If a firm is able to perform due diligence and close deals quickly, manage stakeholders to build consensus and support, and find the right opportunities, they will find many attractive deals in 2009 and beyond.”
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