With confidence in the M&A market slowly returning, the City M&A elite reflects on a positive year and give their prognosis for deal activity in 2015.
Fragile confidence
‘With the value of M&A activity hitting $3.7trn for 2014 and M&A activity increasing in almost every sector of the economy, confidence returned in spades last year and was the result of strategies adopted by companies since the financial crisis.
‘I expect the high value of deals to continue in 2015, but a combination of factors – including the general election in May, the price of oil and the effect of geopolitical risks on business confidence – make me wary of predicting another record year.’
David Patient, managing partner, Travers Smith
More to come
‘The broad spectrum of commentary confirms our experience that things are not only busy at present but there is the prospect of much more to come over the coming months. The election overhang and the associated uncertainty creates an interesting dynamic that may cloud judgements for a finite period before attentions return to wider strategic considerations. Economic and exchange rate movement is more likely to have a profound impact on deal making and support rather than undermine opportunity over the year as a whole. The atmosphere is generally optimistic.’
Michael Hatchard, head of English law and M&A partner, Skadden, Arps, Slate, Meagher & Flom
A good balance
‘M&A is not an optional sport and, with increased confidence, companies are catching up with several years of low activity as they re-shape their businesses to respond to changing markets, economics and technologies. All sectors are busy (perhaps less so currently in natural resources) and we are seeing a good balance of public and private deals from financial sponsors and corporate clients. Looking forward, the same fundamentals underpin a positive outlook. There are some potential macro risks out there, but at the moment, unless and until they escalate, we do not expect a reversal of current activity levels.’
Simon Marchant, head of corporate, Freshfields Bruckhaus Deringer
Guessing game
Charlie Geffen, chair of London corporate, Gibson, Dunn & Crutcher
No surprises
‘There will be no real surprises in M&A this year. As in 2014, we’re still seeing high levels of proposed deals, but also, by historical standards, quite high levels of uncompleted deals. There’s no sign yet of a Greek euro exit dampening enthusiasm for buyers, even though eurozone risks are not much diminished. If a Grexit starts to look imminent, panic will no doubt return for a while and M&A in Europe will see another lull.‘
Tim Emmerson, corporate partner and head of European M&A, Sullivan & Cromwell
Increased appetite
‘2014 was a busy year as clients have strengthened their balance sheets over the past few years and the stronger UK economy has increased their appetite to invest. This has been helped by the banks’ willingness to lend, at decreasing rates of interest. I remain confident for 2015. Although the eurozone structural issues remain and we have seen increased financial-markets and commodity-price volatility, the lower oil price will help the wider economy.’
Andrew Edge, head of corporate, Stephenson Harwood
Pump up the volume
‘If 2014 was the year of the return of the mega deals, we expect 2015 to be the return of M&A volume in the mid-market. Banks are forcing M&A as they are increasing their efforts to divest themselves of the last of their bad debt books and the market is likely to be receptive to this movement. Pricing is a bit frothy still. People are paying significant multiples, particularly in tech, but we are still far from the days of outrageous valuations.’
Bob Bishop, head of corporate, DLA Piper
Picking up speed
‘The European banking sector may see an acceleration of disposals of non-core assets as banks look to reduce exposure to risk-weighted assets and investors look to unlock value. Expect some spin-offs across sectors to be driven by activist shareholders. Private equity will continue to look for exits and, given the uncertain equity markets and the UK election next year, dual-track IPOs [initial public offerings] and M&A exits are likely to be a theme.’
Stuart Bedford, London head of corporate, Linklaters
Consistently strong
James Palmer, senior partner elect, Herbert Smith Freehills