Worldwide mergers and acquisition activity will hit $3.2 trillion (£2.4 trillion) in 2018, as dealmaking is lifted on a rising global economic tide, according to forecasts to be published today.
Investors are feeling “increasingly confident” because of a pick-up in global trade and GDP growth across most of the world, according to analysis by law firm Baker McKenzie and consultants Oxford Economics.
Next year will mark a “cyclical peak” for several macroeconomic and financial deal drivers, pushing a significant increase from the $2.6 trillion total M&A activity expected for 2017.
A $3.2 trillion haul would represent the third-highest yearly deal value since 2001 and the second-highest since the financial crisis in 2008. However, it would still remain below the $4 trillion recorded before the global financial crisis.
The report also forecasts a strong pipeline for initial public offerings (IPOs), with a climb from $187bn in 2017 to a cyclical peak of $290bn in 2018, near to record highs.
That figure could rise significantly higher if Saudi Aramco follows through on a plan to list. Potential proceeds from a flotation of the state-owned oil giant are not included in the Baker McKenzie forecasts owing to doubts over the timing and size of the listing.
The UK will see a “a significant increase in domestic and inbound activity in 2018”, according to Tim Gee, a corporate partner in Baker McKenzie’s London offices.
Separate data from accountants EY show a markedly increased appetite for cross-border M&A in the UK.
Baker McKenzie’s forecasts show a 60 per cent year-on-year increase in M&A deal value next year, before falling back to 27 per cent lower than 2017 by 2020, as the UK leaves the EU.
UK inbound activity has been boosted by the weakness of sterling, which has made companies more attractive for foreign buyers, but fears over the shape of future trade relationships have caused some caution from companies.
Paul Rawlinson, Baker McKenzie's global chair, said: "After a few soft patches in 2017 we have a more optimistic outlook for the global economy and dealmaking in 2018, as long as the brakes are not put on any further on global free trade.
“We see an uplift in both M&A and IPO activity as dealmakers and investors gain greater confidence in the business prospects of acquisition targets and newly listed businesses.”