Eight M&A Trends for 2018

The Coming Year Brings More Global M&A Deal Activity.
By Jim Jeffries, Chairman of the M&A Leadership Council

As your M&A team looks ahead to the coming year, what do you see? Experts predict that 2018 will be a banner year for global M&A transactions, so now is the time to start preparing your organization to maximize value on every deal. Here’s a look at eight M&A trends for 2018.

Technology Will Take Center Stage

Companies have long been vying to offer the best, most innovative technologies, and pursuit of tech opportunities will continue to drive acquisitions in the new year. Meanwhile, the healthcare and pharmaceutical industries are also primed for increased M&A activity. Technology acquisitions present unique challenges for M&A professionals, from potential intellectual property issues to new and unpredictable cybersecurity risks. To proactively address these kinds of issues, your team will need to take a more holistic and strategic approach to due diligence in 2018.

Talent Acquisition and Retention Will Play Greater Roles in M&A Strategy

Given the M&A community’s focus on acquiring technology, it’s no wonder that people are increasingly viewed as critical assets. After all, they’re the ones driving innovation and growth. What does that mean for M&A practitioners? Your team must consider employee retention from the very beginning. Rather than inviting HR to the table when integration begins, include HR leaders in the due diligence process—and invest in M&A training for your HR team so that they’re prepared to contribute to your M&A deal strategy, execution and evaluation.

Divestiture Activity Will Rise and Become More Strategic

No longer are divestitures undertaken only by cash-strapped companies looking for emergency capital. In recent years, more organizations have been adopting a “portfolio-driven” approach to their business units. In addition to investing in new acquisitions, they’re also shedding business units through strategic divestitures. Even traditional buy-side M&A teams will be well served to get specialized divestitures training this year; although divestitures share plenty of attributes with acquisitions, they are not simply “acquisitions in reverse.” In fact, divestitures are often much more complex than other M&A transactions.

Business/IT Alignment Will Be an Even More Pressing Concern

Cybersecurity has become a buzzword in the M&A community, as high-profile security breaches have hit organizations of all sizes. But cyber risks are only one aspect of the IT function. IT plays an important—but often overlooked—role in supporting the attainment of key business objectives. More and more business functions rely on a robust, secure, dynamic IT infrastructure. The successful M&A professional of the future will need to go beyond evaluating cybersecurity, to ensure that business strategy and IT are optimally aligned.

Cross-Border Deals Will Occur More Frequently

While global economic issues like Brexit may have curtailed some cross-border deal activity in 2017, the new year will likely see an increase in cross-border transactions. Interest rates remain low worldwide, oil prices are stabilizing, and China has enjoyed a mostly smooth economic transition. Thus the U.S. will probably remain the largest market for M&A activity, but there will also be increased growth throughout Asia, Latin America, Africa and the Middle East. The chart below, from the Intralinks Deal Flow Predictor for Q1 2018, illustrates probable areas of increased global M&A activity. M&A teams should be prepared to enlist HR and legal experts with specialized expertise in international deals.

Vertical Integration Opportunities Will Drive More M&A Activity

The past several years have been marked by consistent industry and sector consolidation, and 2018 promises to bring a new focus on vertical integration. That is, organizations will look to acquire entities both up and down their supply chain. A notoriously risky strategy, vertical integration comes with unique pitfalls and complexities, particularly with respect to integration. During the integration process, M&A teams that will be managing deals for the purposes of vertical integration should pay particular attention to preserving and protecting all identified operational and cost synergies.

M&A Teams Will Adopt More Robust Tools

Thanks to new M&A specific software and  virtual data rooms, M&A teams are leaving their spreadsheets behind. More sophisticated tools mean increased speed, decreased costs and at-a-glance information, all of which pave the way to better deal value. If you haven’t adopted new tools already, your M&A team should test and evaluate different cloud-based software to streamline your process.

More Deals Will Generate the Expected Value

M&A deals historically fall short of their projected returns to stakeholders, making this prediction an optimistic one. However, the M&A Leadership Council has now trained more than 2,500 M&A professionals who have returned to their organizations ready to adopt and adapt best practices from leading M&A experts in every phase of the deal cycle. And as M&A professionals continue to educate themselves, we anticipate that more organizations will enjoy increased deal value in the future.

Is your M&A team ready for 2018? The M&A Leadership Council has a full calendar of training programs available for corporate executives. Register your team today.