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Five Merger and Acquisition Trends in 2017

There’s good news for dealmakers in 2017 as executives expect brisk merger-and-acquisition activity this year.

Surveys of executives by banks and accounting firms show companies won’t be standing still this year. That’s even as risks of all kinds abound, from regulatory oversight to geopolitical uncertainty and technology disruptions.

Five merger-and-acquisition trends in 2017 will redefine the corporate landscape as executives seek to take advantage of opportunities while mitigating challenges from all sides.

1. Mergers and acquisitions will continue to be active in 2017. Executives are looking at more targets and deals will tend to be smaller as they target startups and fast-growth technology innovators. According to a survey by EY Global Capital Confidence Barometer, 57% of executives expect to actively pursue acquisitions in 2017 and 49% of companies have more than five deals in their pipeline. What’s more, 76% see the global economy as either stable or improving and 82% see corporate earnings as either stable or improving. Still, modest global growth will drive mergers and acquisitions as companies seek to boost results, according to JP Morgan’s 2017 M&A Global Outlook report. Low cost of funds and high stock valuations will also be positive for deal activity, the report says.
2. Regulatory uncertainty will remain. Notwithstanding the outcome of the 2016 U.S. elections, regulatory uncertainty will present challenges to deal making, delaying mergers and acquisitions or halting them. Regulatory scrutiny won’t be limited to the U.S. as European and Asian governments scrutinize deals too, says JP Morgan. The rise of populist parties across the globe has become a rising concern for executives, who cite this risk as nearly as significant as capital-market volatility, EY reports. The challenge is especially significant when companies operate across jurisdictions with varying standards and levels of oversight from regulatory authorities.
3. Activist investors will remain prominent. There will be increased activity from private-equity funds and hedge-fund activist investors who have proven adept at challenging corporate strategies, says JP Morgan. The bank expects increased activity from private-equity funds which it estimates have $822 billion in capital available for investment purposes. What’s more, large institutional investors have demonstrated a willingness to back activist shareholders in their campaigns in recent years.
4. Acquiring technology assets has surged in importance. According to Deloitte, acquiring technology assets has surged to the second most-important driver of mergers and acquisitions, just behind expanding product offerings or diversifying services. The firm says 19% of executives it surveyed cited acquisition of technology assets as the most critical driver of deal activity, compared with just 6% a year ago. That’s why many companies are eyeing smaller, more innovative targets than the megadeals of the past, also notes EY.
5. Big data and analytics are driving deals. According to EY, 91% of corporate boards the firm surveyed plan to use big data and analytics as part of their deal process. Deal teams are using analytics to identify areas of growth and potential targets that are aligned with their strategy. EY says the top reason boards use analytics for their deal process are to better identify synergies and determine appropriate valuations. That’s due in part to the fact that companies may be targeting acquisitions in unfamiliar industries. Executives are applying more sophisticated analytics in their buying and selling processes, especially in complex cases.

Qorval has extensive experience helping companies evaluate mergers and acquisitions. Our experts have decades of experience assisting firms in a broad range of industries. To speak with us, please call 239-430-0303.