The 27th Rainmaker Summit held various sectoral panels ranging from Agriculture, Food and Beverage, Biotech, Pharmaceutical, Health Sciences, Information Technology and examined the challenges and opportunities that exist and are to be discovered in relation to the M&A business industry. Directors and executives in charge of such deals in their respective markets were also present.
The international network, “M&A Worldwide” brought together more than 80 consultants from all over the world in mergers and acquisitions (M&A) in Barcelona on October 26 and 27. For 2 days these top M&A experts met with executives from large companies and groups to forge large-scale corporate deals and to study possible cross-border business transactions.
An interesting presentation was initiated by the conference chair and a number of members commented on the geo-political influence that various countries political/governance has on the M&A profession. These perspectives from around the world shed light on our changing world and the affects and risks of political interventions as it relates to M&A practices.
The day after and for weeks following the election existing contracts were closed and new mandates decreased by 90%, but now as business starts to returns to a “new normal” after the Trump election. It is noted that no laws relating to M&A have been passed on congress and “Trump’s twitter” is not government.
The US election did cause one large transaction between a US PEG and our partners in Mexico to go off the rails. The firm suffered greatly and had to lay off employees etc. they were not able to join us in Barcelona because of the difficult year they have had, but the country is now on the rebound.
Despite the unstable political situation as a result of Brexit, the M&A outlook has been positive in recent weeks. Although, there has been some impact on currency rates, there has been little or no impact otherwise on M&A transactions.
Turkey has experienced a challenging M&A environment over the past couple of years, which has lead to lower foreign investment and smaller deal sizes. The political unrest and the influx of refugees has hurt the M&A business, but the growth rate remains at 5-6% with the primary interest in investments in multinational technological firms.
Cross border M&A activity is closed due to western world sanctions.
The government’s main concerns are to protect the security of its people. Its laws are focused primarily in areas of industry, labor laws, housing and education. These laws affect the entire economy including M&A.
Although geo-politics and the electronic network dominate business worldwide, M&A remains a business based on trust and relationships. Although progress in recent years developed slowly in Hungary it has 77 active company transactions in 40 countries. The future appears promising with a steady increase in cross border deals.
Realistically China has no free trade and no free flow of capital as communism is viewed as the only true success. Chinese financial institutions are stressed and Chinese company investments are restricted and will be more restricted in the future. The goal is to strengthen, merge and fund government owned corporations not private companies, but unfortunately there are strong foreign exchange rules on currency.
The government is “forcing” companies to sell foreign investments: ie. Waldorf Astoria Hotel purchased in 2015 at what is believed to have been an over-valued price of $2B, the hotel closed in March 2017 for renovations that will take 2-3 years to complete. Now the government wants the insurance group that purchased the hotel to sell it at what would likely be a huge loss and reinvest the money in something that would promote the government’s interests.
All M&A companies must be government approved and the Chinese government must pre-approve transactions. In essence, the M&A business is government controlled.
Australia needs to attract capital and investments. There are government programs available to support infrastructure and as a result, contracting and building industries are strong. Free trade exists with Korea, Japan and much of Asia.
From discussions with a pharmaceutical company based in Catalonia, the interim appears to show that the political situation is hurting investment in the Catalan region. For example, some anti-separatist doctors refusing to prescribe drugs from Catalan based companies. This seems like it is more “heat of the moment” decision making and should return to normal after the dust has settled.
Global politics and the government of various countries and regional concerns all impact South American countries. Although regional investment vary, the main focus is on agriculture and minerals and the ability for companies to have a minimum of 3-5 years of stability.
Change is both constant and inevitable and one must be aware of the immediate and long term impact these will have on our clients and ultimately our practices.
The 2018 AMAA Miami Conference is under two months away and will host members and guests from around the globe to connect for 2018 deals. For 19 years our biannual conference has been the premiere location for deal makers both domestically and internationally.