Alvarez and Marsal
A&M Global Transaction Advisory Group

Cross-Border M&A 2018 Trends: Factors Impacting the United States

Anthony Caporrino
US Practice Leader, Global Transaction Advisory Group
acaporrino@alvarezandmarsal.com

From a global M&A standpoint, navigating the current uncertainty and volatility in the United States due to trends such as the US-China Trade, US Tax Reform, and an abundance of dry powder, can be complex.

As we move through the rest of 2018, our Alvarez & Marsal Global Transaction Advisory Group continues to utilize our differentiated approach and unparalleled positioning to take note and navigate this volatile market. Below, I provide my point of view on the key global and regional factors contributing to the US M&A deal landscape and what our clients should be mindful of.

What is driving US M&A Activity?

A Significant Amount of Dry Powder
Despite a slowdown of fundraising in Q2 2018, the effects of its record-breaking levels are still lingering in the market – including new funds with good traction at first time raises. This amount of dry powder has generated a very competitive market and PE firms are feeling the pressure to invest, which in turn, has resulted in high multiples and increased overall activity in both volume and dollars.

Relatively Cheap Financing
Although the Fed has increased interest rates this past year, interest rates remain relatively low. While most industries are experiencing favorable conditions due to this factor, it is particularly advantageous for the middle market as these incremental changes have less of an impact on deals.

Increased Deal Competition from Strategics
As a result of US Tax Reform, corporate tax rate changes have become favorable for strategics as it relates to the available cash they could have for potential acquisitions. Those sitting on large piles of cash have an edge – the opportunity to outbid Private Equity firms, giving them, quite literally, a run for their money.

What are the global factors affecting cross-border M&A activity?

US-China Trade Tensions
With President Donald Trump’s decision to impose tariffs on Chinese goods consistently in the news cycle, some companies have accelerated purchasing raw materials to benefit from lower costs, and in turn, benefit earnings. These companies are getting ahead of potential tariffs, although with the consistent application of tariffs by the Trump Administration, this is getting more difficult to do. Of the various industries in the US, the agriculture and the manufacturing sector will be the most strongly affected as trade tensions continue.

The Scrutiny of CFIUS
Under the watchful eye of Committee on Foreign Investment in the United States (CFIUS), global M&A will be impacted as certain transactions by foreign buyers could be drawn out, or all together declined, in the US.

Shift in Currency Values
In regions where currency is weakening, such as South America and Europe, asset prices can potentially become more attractive to foreign buyers – and therefore increase cross-border deals.

How Can Alvarez & Marsal Assist You in the Current Global M&A Landscape?

Having a presence in more than 50+ offices in 20+ countries gives our Alvarez & Marsal team an edge, providing our Global Transaction Advisory Group the opportunity to be uniquely situated to advise on cross-border deals. Our global reach coupled with a local viewpoint allows us to be exceptionally in tune with trends happening both regionally and globally.

With our vast experience in addressing these matters and ability to draw on industry experts worldwide, we enter any given situation with a clear knowledge of the opportunities a buyer should anticipate.

For more information about our Cross-border M&A services: https://www.alvarezandmarsal.com/expertise/global-transaction-advisory

Source:

SOURCE: ALM VANGUARD: TRANSACTIONS - ACQUISITIONS CONSULTING JUNE 2019 REPORT

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