M&A Market Trends
Last year recorded the second-lowest M&A deal volumes both globally and in Europe over the past decade, with 2023 being the lowest. However, there is a positive trend as M&A activity is now on the rise. The rise of Private Equity (PE) continues, with global dry powder (uninvested capital) remaining at record highs, indicating substantial funds available for investment.
The IPO markets are facing challenges and remain in the doldrums due to ongoing macroeconomic and political uncertainties, leading to a preference for private transactions over public listings. Continuation funds and rollovers are becoming more prevalent as firms seek to extend the life of their investments. However, Foreign Direct Investment (FDI) and export controls, along with competition restrictions, are expected to continue impacting deal timelines and adding complexity to cross-border transactions. This leads to simpler, more local and focussed transactions seeking to avoid those FDI and competition obstacles.
Geopolitical and Economic Outlook
The USA is expected to remain strong in terms of M&A activity, providing a stable environment for deals. Political instabilities in Germany and France are continuing to cause uncertainties, likely affecting investor confidence and leading to a more cautious approach in those markets. There is an expectation for more focus and potential improvements in the second and third quarters of the year.
DEI and Governance Challenges
Governance and Environmental factors remain key considerations for advisors in M&A transactions, crucial for ensuring sustainable and responsible business practices. Social aspects, particularly in the USA, are under pressure, exemplified by challenges such as the Trump administration's stance on DEI initiatives, creating a contentious environment for social equity efforts.
AI's Role in M&A
AI will not replace lawyers but is expected to significantly speed up various processes involved in M&A transactions, including due diligence, contract analysis, and compliance checks. It is essential to focus on governance, data quality, and digital trust when integrating AI into M&A processes. Ensuring that AI systems are reliable and trustworthy is crucial for their effective use. Learning how to create the right AI prompts and effectively utilising AI tools will be important skills for professionals in the M&A field.
Key Sectors
There is a strong focus on B2B (business-to-business) sectors, technology, and healthcare. These sectors are seen as having significant growth potential and are attracting considerable interest from investors.
Legal Considerations
Choosing the applicable law wisely is crucial in cross-border M&A transactions. English law and the English courts or the London Court of International Arbitration (LCIA) continue to be key choices for transactions with an English element, providing a reliable legal framework. Clients should be aware that pre-signing disputes can be costly. It is advisable to instruct lawyers early in the process to mitigate potential legal challenges and ensure smooth transaction execution.
For more detailed guidance, get in touch with our M&A legal team who can provide tailored advice and support throughout the transaction process.
We are proud members of Meritas, a global alliance of leading independent law firms. The Meritas M&A group has approximately 1,000 skilled M&A and transactional lawyers spanning over 200 markets in 80 countries. Discover more by viewing the Meritas M&A brochure here.
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