After a record-breaking 2015, M&A activity slowed somewhat in 2016. Global deal values fell 18.5% to $3.6 trillion, a figure that ranks as the second-highest total since the financial crisis. In terms of midcap M&A, about 3,500 transactions were completed in 2016 for a total of $1.0 trillion; these figures represent decreases of 4.1% and 5.1%, respectively, from 2015 levels.
The geopolitical environment was one contributing factor to the slowdown in 2016. Britain’s surprising decision to exit the European Union created modest headwinds to dealmaking. While Donald Trump’s election as U.S. president could ultimately lead to increased M&A activity, it likely had a dampening effect in 2016. In most years, there is a rush in December to close deals before year end, but in 2016 we saw the possibility of lower capital gains rates under the Trump administration causing some dealmakers to delay closing until after January 1, 2017.
In addition to transactions that could have closed in November or December getting pushed back into 2017, there are several other dynamics that suggest that 2017 could be a very active year from an M&A perspective. We examine three factors that could each help drive increased dealmaking activity in 2017: record amounts of capital held by private equity firms, the potential for a lower tax rate on U.S. corporations’ repatriated foreign income, and debt markets that have become increasingly favorable for issuers.
Highlights of this issue of Merger Tracker include:
- Private equity capital overhang reaches record levels
- Tax relief on repatriated income could unlock cash trapped offshore
- Borrower-friendly lending environment drives LBO activity
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