M&A and the Economic Outlook for 2017 and Beyond
On the day after the presidential election, I heard acclaimed Harvard Law School Professor Alan Dershowitz in a chat at a conference for M&A professionals in New York. He quoted a well-known saying: A pessimist wrings his hands and says: “Things could not possibly get any worse.” The optimist says: “Yes, they can.”
Prof. Dershowitz saw the results of the US election as part of a global trend towards a more national, inward-focused political system. Since World War II, the center held, but 2016 has seen a number of moves away from that, such as Brexit in the UK and political movements in Greece, Belarus, Poland, Slovakia, the Philippines and many other countries. His conclusion: the changes in attitudes to globalization means that our economic outcomes are going to change, and we have to start dealing with it.
After two years of strong activity, the pace of global M&A slowed in 2016 and the outlook for 2017 is uncertain given the outcomes of the Brexit vote, the US election, and other world events. Over the past two years I have interviewed scores of M&A professionals for a series of books published by The M&A Advisor. These include CEOs, corporate development executives, lawyers, accountants, and advisors – most with decades of experience in deal-making. To a person they recognize that political and macro-economic events significantly impact M&A activity. But they also see the process of M&A as a beneficial economic activity that enables growth and unlocks value in companies. Likewise, they see the spread of cross-border transactions – which in the past two years have grown to more than 50 percent of all M&A activity – as inevitable as businesses hit a ceiling in their domestic markets and seek to expand globally.
It is interesting that the spread of global M&A is coming at a time of what appears to be rising internally focused and nationalist-based political agendas. Will domestic-focused trade policies win out? And how will this affect cross-border deal-making? As Prof. Dershowitz notes: we’re going to have to deal with it.