The new forecast by Baker & McKenzie, published in association with Oxford Economics, predicts more than $2.6 trillion of deals to be completed within the sector from 2015 through 2020. With steady growth from a projected $324 billion in deals in 2015, transaction activity is expected to peak in 2018 at $492 billion, as such companies continue to see M&A as a way of gaining market share in a disruptive sector.
Anne-Marie Allgrove, Baker & McKenzie’s Global Technology leader explains, “Tech businesses have become increasingly active players in global M&A as intense capital requirements make acquisitions a strategically compelling way of achieving economies of scale. The dynamic nature of the competition we are seeing in the sector provide further incentive to quickly scale.
“For example, innovations in mobile payments system, data analytics, cyber security and cloud computing create the need for new intellectual property and talent that many companies can access quickest and easiest through acquisitions. In addition, business models continue to converge helping to further boost M&A activity, such as with telecoms businesses seeking vertical integration with media and technology.”
A robust outlook globally
Markets that are predicted to grow the fastest in terms of overall M&A in the next 5 years are China, The Netherlands, Mexico, India, UK, Germany, Indonesia, Saudi Arabia and the UAE
“Many US and European companies have accumulated large cash balances available for acquiring new businesses,” explains Tim Gee, Baker & McKenzie’s global head of M&A. “Financial sponsors also have the potential to boost global transactions, with private equity firms sitting on a record US$1.1 trillion in uninvested capital. Cross-border transactions will play a significant role as companies look to gain market presence in high growth markets.”
The projections are part of a unique 6-year forecast of global transactional activity, developed in partnership with Oxford Economics. The comprehensive report, The Impact of Macro Trends on Future M&A and IPO Activity sets out predictions across regions, sectors and individual countries worldwide through 2020, linking economic outlook with corporate activity.