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Geographic and sector M&A outlook

Global Capital Confidence Barometer | 18th edition

Lingering geopolitical uncertainty is not hampering cross-border and sector deals

Despite fears of greater protectionist actions by governments, executives still expect cross-border M&A to be the major theme of M&A in the next 12 months. For many companies, dealing in a globalized market is a necessity. Technology is connecting companies with customers across the globe and growth plans are no longer country-centric.

A strong presence of private equity (PE) in the deal markets is also expected by executives. This trend began to accelerate in 2017 and has continued in 2018. There has been an increase in the size of deals involving PE, as well as more situations where PE and corporates collaborate on deals across many sectors and geographies.

If executives are comfortable buying abroad, they are becoming equally open to buying across traditional sector lines. With convergence a major driver, executives expect to see more cross-industry deals in the near term.

Companies still look across borders for assets, despite protectionist fears

Regardless of heightened protectionism and new rules governing cross-border dealmaking, companies are increasingly looking across the globe for innovative assets and access to new customers.

Surprisingly, while both the US and Western Europe have tightened oversight on inbound acquisitions, they come out as the clear destinations of choice for executives. The key to transforming portfolios will be accessing or acquiring the right intellectual property in these regions.


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Top sectors ready to deal



Oil and gas

With oil price stabilization has come a transition to a new normal, which has seen confidence grow over the past six months. There is an expectation of increased activity through the coming year as more activity in both upstream and downstream is seen.

Telecommunications

Telecommunications companies continue to show elevated M&A appetite at a time when convergence, consolidation and digital growth opportunities are pronounced across all geographies.

Automotive and transportation

At a time of rapid technological disruption, automotive companies are proactively managing their portfolios to protect their core businesses. Key markets, such as China, Europe and California, where the push for vehicle electrification is highest, are driving the case for change.

Consumer products and retail

Companies are looking at both bolt-ons and transformational deals as they consider how to accelerate their value-creation strategies. However, high prices and scarcity of assets mean many appetites are not being fulfilled, with discipline being shown by consumer products companies in their dealmaking.

Mining and metals

Consolidation deals to unlock value through synergies will be fueled by a growing threat of intervention from activist investors and potential acquirers. Divestments remain a significant driver as non-core assets are spun off in favor of leaner, optimized portfolios.

Power and utilities

There is a strong interest in regulated businesses, including electric transmission and distribution, gas distribution, contracted power generation, water distribution and treatment businesses, as well as renewable energy assets. A combination of historically low interest rates and scarcity of attractive deal opportunities has led investors to be aggressive in pricing opportunities when they become available.

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