Business

Successful Dealmaking in Uncertain Times

Even by recent standards, 2018 has been a remarkable year for M&A.

Figures from Thomson Reuters reveal that dealmaking in the first six months of the year hit $2.5tn, the highest figure since it began documenting transactions almost 40 years ago.

That this bull run should coincide with a period of intense geopolitical instability is testament to the enduring power of M&A to drive growth, alongside broader business trends such as digital transformation and the ready availability of finance. But executing deals in the current climate is more challenging than ever, particularly at the top end of the market.

Rising regulatory and political pressure is putting mega-deals at risk.

In an era of protectionism, governments are more likely to demand commitments from buyers as they try to protect domestic jobs and keep critical technologies out of foreign hands. And the bigger the deal, the more attention it receives – antitrust authorities including the European Commission and China’s State Administration for Market Regulation often seek to impose remedies in return for the necessary approvals.

In response, M&A practices are evolving. Buyers are becoming more sophisticated about the way they communicate the rationale for transactions, often focusing less on ‘synergies’ and more on investment commitments including around jobs. The ability to get out ahead of antitrust and related concerns and present a remediation package to regulators – rather than waiting for one to be imposed – can keep businesses in control. And sophisticated structuring techniques, for instance that take advantage of relevant investment treaties and regulation, give companies a means to resolve disputes and cross borders with confidence.

In uncertain times, the biggest deals can still be done – with the right approach.

 

The interview was filmed with Sarah Lockett, Business Correspondent of The Business Debate and Bruce Embley & Matthew Herman, co-heads of global M&A at Freshfields.

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