On June 12th we hosted our inaugural Reuters Global M&A Summit, an exclusive event that brought together senior investment bankers, M&A lawyers, international investors and corporate executives. Leon Saunders Calvert, Global Head of Capital Markets Advisory, Thomson Reuters, explores the highlights from the day.
The business of mergers and acquisitions has always carried political risk – its link to jobs, taxation and national prestige makes that inevitable.
But in these times of super-charged politics, polarised elections, referenda and QE, state-craft has moved from bit-part to central player in the world of deal-making.
To explore the impact of this, we held the Reuters Global M&A Summit in London on June 12, bringing together some of the world’s leading investment banking M&A advisers and investors.
Watch the highlights from the Reuters Global M&A Summit
Political volatility and macro uncertainty are normally more than enough reason to delay decisions and shrink from deals. There is not much sign of this so far. In fact, companies are responding in a strategic and outward-looking manner, using M&A as a tool to manage risk and exploit opportunity.
This is a matter of record: the first half of 2017 saw US$171 billion of announced M&A transactions between the US and Europe, up more than 82% on the same time last year, and the highest year-to-date total in a decade.
Watch video — Thomson Reuters Leon Saunders Calvert opening remarks
The easiest drivers to identify are often the most peripheral. Supportive FX, cheap financing and general macro-economic backdrop are certainly important tailwinds, but they do not constitute a strategic rationale in themselves.
The real drivers for M&A tend to be long-term and fundamental: companies acquiring innovations to stay ahead of tech disruption; diversifying political risk through cross-border M&A; proactively divesting non-core assets in an environment of activism; and acquiring growth against a challenging economic backdrop, where organic growth is strained.
And all this is under-pinned by that elusive quality – CEO confidence.
Our first panel explored the growth of protectionism and the continuing dominance of China on the M&A world stage.
There is no question that protectionist rhetoric is growing, whether from President Trump’s Twitter feed, Berlin’s angst around Chinese buyers or the new French President Macron’s talk of a “protection agenda” and a “European Buy Act.”
In this context, as Karen Cook, Chairman of Investment Banking at Goldman Sachs, emphasised, while the UK is making increasingly protectionists noises in the run up to Brexit, it remains one of the most open and non-protectionist markets in the world.
Our second panel delved into boardroom mind-sets to unpick the current dash for cross-border M&A. Part of this is driven by an increasingly activist shareholder presence on both sides of the Atlantic.
However, it is a mistake to generalise about Europe. Compared to the US, activism tends to constructive, with positive working relationships between company boards and activists.
With all this background noise, can the next half of the year possibly keep pace with the breakneck rate of M&A witness in H1? Hernan Cristerna, Co Head of Global M&A at JP Morgan, suggested that in value terms, this is unlikely.
Big transformational deals are too easy to become political footballs and only the most consensual and strategically sound deals are likely to fly.
But beneath the mega deals, a vibrant M&A sector targeting middle market companies is likely to keep deal volumes high. The drivers beneath such investments are not cyclical or opportunistic, but fundamental to corporate health, growth and relevance.
In a market such as this, to operate effectively you need to know what’s happening from every angle, in real-time.
Thomson Reuters sits at the nexus of markets, geopolitics and macro-economics. We have the world’s most extensive referential content on the deal-making market and, critically, we provide the context in which deals are struck and reputations are forged.
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I hope you can join us next time.
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