M&A Forecasts 2019
by Steve Wright Ph.D. of Transworld Business Advisors of Raleigh, NC - January 1, 2019
Everyone wishes that they had a crystal ball heading into an uncertain 2019 business cycle. While 2017 and 2018 seemed secured with a strong economic tailwind, 2019 is less predictable for several reasons.
As thriving businesses and savvy corporate executives seek to gain margins and continue aggressive growth trajectories, the markets seem somewhat unruly of late. Political and economic volatility factors weigh on the mind of business leaders across the US and global markets.
Seize The Day
Look for savvy business owners to take advantage of what might seem to be uncertain economic days. The Rockefellers and Carnegie business types have always historically used uncertainties to maximize growth through strategic mergers and takeovers.
The five largest historical M&A deals happened in similar uncertain days. AOL and Time Warner (2000), Anheuser Bush and Miller (2016), Dow and DuPont (2017), Heinz and Kraft Foods (2015), and Exxon and Mobil (1999) are regarded as the largest M&A strategic mergers. These mergers happened during seasons that economist had more questions than answers.
Noteworthy 2019 M&A Forecasts
According to Factset, the following stats have a great bearing as we head into the 2019 business cycle.
- "Topping the list of the largest deals announced in October are: International Business Machines Corp. agreeing to acquire Red Hat, Inc. for $33.5 billion; Harris Corp.'s deal to acquire L3 Technologies, Inc. for $15.8 billion; Antero Midstream GP LP's agreement to acquire Antero Midstream Partners LP from Antero Resources Corp $5.8 billion; Calsonic Kansei Corp. agreeing to acquire Magneti Marelli SpA from of Fiat Chrysler Automobiles NV for $7.1 billion; Invesco Ltd.agreeing to acquire OppenheimerFunds, Inc. from Massachusetts Mutual Life Insurance Co. for $5.7 billion."
- "U.S. private equity activity increased in October up 8.9% from September. There were 135 deals in October compared to 124 in September. Aggregate transaction value decreased, down by 9.3% to $16.4 billion from September's $18.1 billion."
- "U.S. M&A deal activity increased in October, going up 16.7% with 1,209 announcements compared to 1,036 in September. Aggregate M&A spending increased as well. In October, 59.6% more was spent on deals compared to September. Over the past 3 months, the sectors that saw the biggest increases in M&A deal activity, relative to the same three-month period one year ago, was: Commercial Services (565 vs. 437), Industrial Services (163 vs. 111), Consumer Services (241 vs. 191), Distribution Services (182 vs. 141), and Producer Manufacturing (187 vs. 162). Sixteen of the 21 sectors tracked by FactSet Mergerstat posted relative gains in deal flow over the last three months compared to the same three months one year prior."
M&A Forecast for 2019
Since the 50’s we have averaged around 10 major mergers per decade worldwide. Since 2010 there have been 43 M&A deals worldwide larger than $20 billion in value. The trend, like it or not, is a strong continuation of strategic mergers. 2019 might just be the strongest year closing out a voracious decade of deals.
Remember that volatility or uncertainties in the global markets are not always a sign of trouble. For acute and discerning executives, these uncertainties appear like blood in the water for hungry sharks.
I am looking for 2019 to be a strong year for M&As. Look for the rich to get richer. Global and U.S. merger and acquisition activity both hit all-time highs during the first half of 2018, driven by mega-deals in sectors like media, according to data from Thomson Reuters. Only time will tell if 2019 starts off as strong as 2018. Hogan Lovells and others believe that global M&A trends should propel a robust M&A market moving into 2019.
I believe that dealmakers while remaining watchful, are viewing prospective M&A pursuits in 2019 with a reasonable measure of assurance.
View our current business listings.
Transworld Business Advisors is a world leader in the M&A in the middle market space. Our dedicated middle market team works with clients in the $5-$75 million valuation space.
Transworld Business Advisors has 40 years of experience and offices worldwide making us a premier M&A leader. Contact us if we can advise you with your Raleigh M&A needs- 919.379.5776.