Baker & McKenzie's Global Transactions Forecast gives hope:
Mergers, acquisitions and public offerings will continue to increase
International law firm Baker & McKenzie published the Global Transactions Forecast, a projection of mergers, acquisitions and public offerings from 36 countries around the world, in cooperation with Oxford Economics. Esin Attorney Partnership, the Turkish member firm of Baker & McKenzie, is also releasing a Turkey specific report in conjunction with the global forecast. The data regarding global transactions indicates that mergers, acquisitions and public offerings will continue to rise in the next three years. Global economic growth is expected to accelerate, and low interest rates and easy credit conditions in key countries are likely to maintain upward momentum in equity markets.
According to Baker & McKenzie's projections, global mergers, acquisitions and public offerings will reach its peak in developed markets in 2017, and in developing markets in 2018. According to the same forecasts, mergers and acquisitions transactions will reach USD 2.6 trillion in 2015, USD 2.9 trillion in 2016, and USD 3.3 trillion in 2017.
Turkey will reach its peak in 2018
According to the Turkey specific data of the forecast, political uncertainty weighed on Turkey's economy in the first half of 2015 and the unclear outcome of the June elections presents a risk that this instability could continue through the year. Assuming that a stable government is formed, however, GDP growth is expected to accelerate in the second half of 2015, which will boost domestic equity prices and transactional activity.
The forecast shows the total value of completed M&A deals falling from USD 11.3 billion in 2014 to USD 9.8 billion in 2015, before peaking at USD 16.1 billion in 2018. By the same token, mergers and acquisitions transactions, which totaled 264 in 2014, are estimated to rise to 350 in 2018.
A similar tendency is observed for public offerings in Turkey. The total amount of public offerings, which was USD 310 million in 2014, will increase to USD 742.2 million in 2015 before peaking at USD 1.395 billion in 2018.
Growth will continue in 2015
Ismail Esin, managing partner of Esin Attorney Partnership, a member firm of Baker & McKenzie, commented; "The Turkish lira's decreased valuation relative to the dollar means competitive prices for foreign investors looking to purchase Turkish companies with largely untapped potential for increased production or the ability to reach new consumer groups. Key drivers of the positive investment outlook include Turkey's higher annual GDP growth relative to the global average and the ease of doing business in the country."
"In line with the report's findings, Turkey is ripe for investment now," commented Eren Kursun, partner at Esin Attorney Partnership, a member firm of Baker & McKenzie, "Many factors indicate that global M&A will increase in the upcoming years. With the formation of the Turkish government, Turkey is well-positioned to take advantage of this trend. Due to the current strength of the US dollar, prices are at a more reasonable level especially for strategic investors, creating significant opportunity in the market.
Regarding global growth, Tim Gee, Baker & McKenzie's Global Head of M&A, commented, "For corporates, the window of opportunity for strategic cross-border M&A is now. The structural drivers, cyclical trends such as equity prices and economic conditions such as GDP growth are ripe for deals until 2017. Perhaps most importantly, positive business sentiment is back – CEOs have the confidence to pursue their strategies and the equity markets are rewarding those who deliver."
Relevant to both global and Turkey specific trends, the accumulation of cash balances for acquiring new businesses by US and European companies will be a key driver of growth.
What trends will impact global economic growth?
The report outlines potential risks such as Greece exiting the Eurozone, the UK leaving the European Union, Chinese investment falling sharply, and the US Federal Reserve raising rates faster than expected which could negatively impact the impressive forecast for global M&A growth.
According to the report, six key global macroeconomic trends drive the forecast: extremely accommodative monetary policy, normalizing of business conditions, the strong US dollar, China's economic slowdown, low but rising oil prices, and structural reforms that have led to M&A friendly environments.
Overall, developed economies will underpin the collective growth in transactions, bolstered by easy monetary policy and lower oil prices, while many smaller or emerging economies will show the most dramatic growth in deal activity.
Telecommunication and Healthcare sectors promise future opportunities
According to the Global Transactions Forecast, the sectors with the best long-term prospects are healthcare, telecommunications, and financials. The consumer goods and services sector, technology, and pharmaceuticals tend to be more cyclical, and will experience growth during upswings in deal-making; while basic materials, industrials, and the energy sector may see cyclical boosts in activity despite an underlying trend of slower growth.
Hong Kong tops list of countries attracting investment
The Report also includes a Transaction Attractiveness Indicator that rates the attractiveness of a country's current environment for M&A and IPO activity on a scale from 0 to 10. That score is based on a weighted average of 10 key economic, financial and regulatory factors that are typically associated with higher M&A and IPO activity. Hong Kong comes in as the most attractive country for investment with a score of 9.3, followed by Singapore, Switzerland, the Netherlands and Sweden. Meanwhile, Turkey is ranked as number 29 for attractiveness with a score of 2.9.
Download the Global Transactions Forecast here.
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