China, the US presidential election and tech unicorns: Everything you need to know about M&A in 2016
M&A activity in 2015 has closed out strongly in value terms, with the blockbuster deals we’ve seen in the last few months propping up headline numbers.
The outflow of capital from the US has also been a positive factor. However, the mega deals are masking a degree of uncertainty that has crept into the market as the year has progressed, resulting in thinner M&A volumes in the second half.
This uncertainty may set the tone for the New Year, as concerns around a slowdown in Asia, particularly in China, may have an adverse impact on deal making.
The big three sectors for M&A activity in 2016 will be media and telecommunications, consumer goods and technology.
Read more: Tech unicorn bubble? When building a business, watch out or you could end up swimming with sharks
Media companies will continue the "content arms race", searching for properties across the entertainment and sports genres.
Food and beverage companies are also going to see action next year. Drinks businesses in particular will be stoked by the AB Inbev-SABMiller deal, both in terms of forced sales to secure clearance and the need for competitors to begin a flurry of deal making in order to compete with the new drinks behemoth.
Africa will be an increasingly important market for food and beverage businesses in 2016, and I also expect to see more Asian businesses looking to buy into European branded opportunities.
The hunt for the tech unicorn will continue unabated in 2016, despite talk of frothy valuations. Cyber is top of the list, with managed services and security likely to be boom areas next year. Fintech is now a perennial feature of the tech M&A landscape, and we expect appetite for the right assets to be strong.
Read more: What rocked markets in 2015
Geopolitical uncertainties abound in 2016. Globally, the major macroeconomic headwind is a slowdown in China and other key emerging markets.
I don’t anticipate the US interest rate rise to have a significant negative impact on M&A activity. It’s actually a positive sign of underlying economic stability.
The US presidential election in November – assuming that the outcome doesn’t involve the election of a fringe politician and herald a major game-change – shouldn’t spook deal making too much. There’ll be a degree of slowdown just before the election, as is always the case.
Closer to home, the EU referendum is the big risk for 2016, if it does indeed take place next year. I expect an acceleration of activity in the first half of this year in the UK, as businesses look to complete deals to avoid the impact of a schism if it does occur, and then a deceleration of activity as the referendum approaches.