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After a flurry of megadeals in the second half of 2015 pushed global M&A deal values to the highest they’ve been since 2007, deal making slowed substantially in 2016 amid major economic and political uncertainty in several key economies, according to a new report from Baker McKenzie.

The Global Transactions Forecast, an annual report that provides corporate leaders and investors with an outlook on M&A and IPO activity globally, found M&A transactions fell 17 percent by value in 2016, and predicted this slowdown will continue before rebounding next year.

“We expect that environment of uncertainty to continue at least for the first quarter of this year and so the forecast predicts deal making to drop slightly in 2017 to USD 2.5 trillion from USD 2.8 trillion in 2016 as global investors wait for clarity over the UK-EU relationship, and the new US administration’s policies on trade and investment,” said Michael F. DeFranco, Baker McKenzie’s Global Chair of M&A.

A few highlights from the report:

  • Once greater clarity emerges, global M&A activity is expected to pick up to a peak of US$3 trillion in 2018.
  • From a sector perspective, a key driver of global deals will be the tech sector, where M&A is forecast to reach US$415 billion by 2018 — the highest since 2000. Healthcare, particularly biotech and pharma deals, will also fuel the upturn.
  • IPO activity is expected to rise modestly in 2017 and bounce back in 2018 and 2019 as companies that postponed their listings return to public markets.