M&A's strategic importance endures

In spite of an uncertain political backdrop, 2017 was a solid year for M&A in the US. And our exclusive survey reveals the drivers that could continue the momentum through 2018.

Following two blockbuster years was never going to be easy, but US M&A more than held its own in 2017. The total value of US M&A dropped 14.3 percent to US$1.3 trillion year-on-year, but volume increased by 0.4 percent to 5,347 deals.

Putting this into clearer perspective, 2017 value was the third-highest since the economic crisis took hold in 2008. Solid economic fundamentals continue to ensure deals were done—interest rates remain low, equity values are at record highs and there is a high degree of confidence within the business community. The US economy is growing steadily and continues to create jobs.

Uncertainty around the policy direction of Trump's first year as President weighed on dealmakers' confidence in 2017, as have concerns about antitrust enforcement and increased scrutiny of inbound deals by the Committee on Foreign Investment in the United States (CFIUS). Yet passage of a pro-business tax reform bill eased dealmakers' minds. The enthusiasm is evident in our survey of US dealmakers.

The survey also shows that strong strategic reasons continue to drive M&A. Technology is an important driver, disrupting companies in every industry, changing the way business is done and blurring the lines between traditional sector boundaries. “Old economy” companies simply have to buy tech skills and platforms if they are to survive the era of digital transformation. Meanwhile, technology companies are increasingly showing a willingness to acquire businesses that help them break into new adjacent sectors that they see as important for future growth.

Activist investors remain busy, with significant influence on corporate strategies. And traditional activists increasingly behave more like private equity funds as they partner with strategic acquirers or make acquisitions on their own. Meanwhile, private equity firms have record levels of untapped investment capital available for transactions. No dealmaker can afford to ignore macro-economic uncertainty, but the fundamentals supporting an active deal environment remain in place and M&A's strategic importance remains undiminished.