Deal activity in the Industrials, Manufacturing & Transportation (IMT) sector will rebound in 2018 amid industry disruption, consolidation and the pursuit of new technology.
This is according to our Global Transactions Forecast, which expects global M&A to rise to USD 531.4 billion, up from USD 483 billion in 2017. For IPOs, we forecast an even more active year, with transaction values rising to USD 55.9 billion, up from USD 43.8 billion in 2017.
The rise of emerging technology and the easing of key economic risks and political uncertainty that cooled dealmaking in 2017 will likely fuel the rebound in M&A activity and push IPO activity higher in 2018, along with deal drivers that vary by subsector.
"A number of IMT companies face disruption by things like digitization and are having to rethink their business models," said Nikolaus Reinhuber, global chair of IMT. "This leads to carve-outs and spinoffs on the one hand, and the need to develop strategies to invest in smaller technology businesses on the other."
The Brexit effect
As Brexit negotiations continue, the UK’s pending split with the EU appeared to have little impact on IPO activity in Europe. Although listings were slow the first half of 2017, the pickup in activity in the second half resulted in a year of major growth.
Going into 2017, dealmakers appeared worried about the global economic outlook and the implications of other key elections in Europe following the Brexit vote and the election of President Trump. That apprehension seemed to lift, however, after the French and German elections delivered pro-market, pro-European governments.
In the event of a hard Brexit, which would make it much harder for UK-based IMT companies to export their goods into the EU, experts predict that valuations for UK businesses will decline further.
Following a peak in deal activity in 2018, we anticipate that M&A and IPO transactions in the IMT sector will drop slightly in 2019 in line with a larger, worldwide trend of cooling deal activity in developed markets.
As interest rates rise, global trade and investment growth slows, and equity prices correct, we forecast M&A values in the sector to drop to USD 491.4 billion in 2019 and USD 389 billion in 2020. After reaching a five-year high in 2018, we forecast that IPOs will decline to USD 54.2 billion in 2019, before falling further to USD 40.7 billion in 2020.