Hogan Lovells - 2019 Corporate Outlook Roundtable

At a recent media roundtable in London, partners from Hogan Lovells’ global M&A and regulatory practices discussed some of the trends likely to impact deal-flow in 2019.

Mergers & Acquisitions

2018 proved to be a remarkable year for global deal-making driven by mega deals in many of the world’s largest economies. Deal-makers took advantage of favourable economic conditions – a strong global economy, low interest rates and affordable access to capital – to complete a record number of cross-border deals.

Looking ahead to 2019, Hogan Lovells’ Global Head of M&A, Bill Curtin, said that “despite elements of unpredictability linked to political, economic, trade and regulatory concerns, we see a healthy pipeline of deals being prepared for 2019 owing to sound financial positions of strategics, robust fundraising by sponsors, and a pursuit of disruptive technologies across sectors”.

Adding to this, Head of M&A in Continental Europe, Volker Geyrhalter, noted that there was a “strong appetite among international investors to pour money into Europe, with Brexit shifting the focus towards France and Germany in particular”.

Chinese FDI into Europe and the US plunged to its lowest level in six years due to the Chinese government crackdown on aggressive Chinese deal makers and more forceful efforts by the government to protect their internal markets. Shanghai based M&A partner, Andrew McGinty, added that: the approval process for Chinese ODI (outbound direct investment) has become more onerous and rigorous. We are seeing a shoehorning effect where Chinese companies are linking their overseas investment projects to the belt and road initiative, the state-backed investment campaign, in order to gain easier access to funding and to ensure a speedier approval process”.

Equity Capital Markets

The UK’s Equity Capital Markets dipped in 2018, with capital raising lower than the previous year. The London Stock Exchange was Europe’s most active in terms of IPOs, with a particular trend being the listing of disruptive fintechs who seek to capitalise on the digitalisation of the financial services industry.

Speaking about the ECM outlook for 2019, Head of UK Equity Capital Markets, Maegen Morrison, noted that:“Q1 is likely to be quieter due to the prevailing economic and political situation, with companies who might normally have looked to IPO, delaying their decisions until after Brexit. On a brighter note, we may then see an uptick in activity as companies and investors brush off their plans once they have become accustomed to the new normality.”

Private Equity

The global private equity market ended 2018 as it began, with cash-rich private equity funds feeling the pressure to deploy capital profitably. Last year, there was a shift away from cross-border deals towards more domestic ones, driven by increased protectionism at national levels.

Looking ahead to the first quarter of 2019, Global Head of Private Equity, Tom Whelan, expects " PE funds to adapt appropriate strategies to overcome the current global political challenges that investors face, taking account of their investor base and putting in place investment structures which enable deals to get cleared by regulators." In addition, he noted that “as cross-border deals have become more complex due to increased protectionism, sponsors will need to factor in additional costs in structuring deals (including deal financing) to limit the cost of potential delays”.

Brexit impact on Financial Regulation

The financial services industry remains one of the sectors most impacted by the uncertainties surrounding Brexit, with Head of Financial Services Regulation, Rachel Kent, noting that “with the notable exception of the fintech sector, for the time being it’s difficult to see any transactions taking place in the wider financial industry. Firms are hugely distracted by Brexit which continues to subsume a massive amount of resources”.

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