Uncertain Times, Unexpected Opportunities?

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As the last quarter of 2019 begins, trade wars and geopolitical unrest continue to populate the news. In Finland, growth is expected to slow; in Germany, the economy has shrunk; globally, manufacturing production growth is on the decrease.

How is the M&A market doing? According to Merrill Corporation’s Deal Drivers report, the aggregate value of corporate transactions in Europe was EUR 350 billion in the first half of 2019 – lower by a third compared to the previous year. Seems like a drastic drop, but compared to the second half of 2018, the value has actually grown by 20%. If anything, the numbers suggest that the market is returning to normal after a stormy 2018.

Still, economic and political tensions are seeping into regulation. Foreign direct investment faces increasing government scrutiny. In the EU, 14 countries have passed laws allowing them to have the final say on investments in industries essential to the national economy or national security, and more are set to follow suit.

Recognising this trend, the European Commission issued a framework regulation on the screening of FDI earlier this year. The regulation does not make screening obligatory or establish harmonised criteria, but serves the more general goals of cooperation and transparency. EU countries will have to report their FDI screening activities to the Commission and to each other, which will slow the merger process. Nonetheless, cooperation and transparency are good for the market.

Companies continue to seek growth opportunities across the globe. I believe that buyers will be bold when a lucrative strategic target hits their radar. This time of transition may well translate into opportunities.