Published: October 2016Contents
i) What are the hot topics?
The past year has seen a boom in dealmaking, with many markets reaching post-crisis peaksand some recording all-time highs. Mega deals have been at the heart of the expanding market, with companies tapping into cash piles and cheap debt to fund transformational deals. Looking behind the headline figures, however, a number of factors suggest dealmaking may not continue
ii) Tell us about any key legal developments – recent or pending – and their international impact.
In the past year in Europe, the European Central Bank was forced to start a programme of quantitative easing in the wake of consistently low growth, a full seven years after the Bank of England and the Federal Reserve undertook their programmes.
US interest rates have also tightened for the first time since the financial crisis, contributing, according to some commentators, to the wobbly US markets that marked the start of 2016. Yet this uncertainty has now seemingly passed, and the Federal Reserve is contemplating raising rates further. Meanwhile, Eurozone and UK interest rates look likely to remain low for some time to come owing to continued slow growth and low inflation in the region. How the markets react to this bifurcation of monetary policy across the Atlantic will shape dealmaking in the year to come.
Elsewhere, there have been some concerns that falling commodities prices (particularly that of oil) have been driven by a fall in market confidence. However, it seems that this view is somewhat simplistic. It is more likely that prices have fallen because of excess capacity that built up to service Chinese industrialisation and somewhat weak growth figures. The recent uptick in prices should be seen as an indicator that perhaps the market overreacted and fundamentals remain strong.
iii) What are the biggest opportunities and challenges for practitioners and clients?
Perhaps one of the biggest factors that posed a threat to dealmaking in 2016 was the political uncertainty affecting much of the world. In the UK, the first half of the year was clouded by the referendum on the UK’s continued membership of the EU, and in the US, the presidential election result is likely to have a considerable impact on markets. It is hoped that the resolution of this uncertainty in the second half of the year will foster an environment in which markets can thrive.