We’re hardly a month into 2018 and already it’s been a big year for mergers and acquisitions. What are the current trends, and are they projected to continue throughout the entire year?
Bloomberg is calling it the biggest year for M&A since 2000—in everything from the pharmaceutical to financial industries, deals are happening faster than ever before. As of January 22, $146.6 billion in deals all over the world were reported. With many companies anticipating changes in tax reform, much of last year was a waiting game in regards to making deals. Now that the tax reform law is in effect, larger companies are beginning to look around, and as the numbers prove, act. Having more around the political landscape has led to more bold actions in the corporate acquisition space.
Towards the end of 2017, Deloitte predicted this trend, noting that many companies set aside their cash reserves specifically for acquisitions. As organizations look to expand, obtaining technology that already exists in the spaces they look to move into is often a wiser decision than spending the time creating the same products from scratch, and is the top motivation currently driving M&As. Forming a digital strategy has become a huge component of business. When done successfully, it allows an organization to work more efficiently, and subsequently, earn more revenue without having to drastically increase hiring or spend. This digital strategy has driven many companies to look at what is already in the market instead of creating the technology in-house. Another component of this digital strategy relates to sales—through an acquisition, there is usually a customer base that comes along with the purchase, giving an organization access to consumers they may never have met otherwise.
As acquisitions increase in 2018, it is not only companies that are merging, but industries.
Technology and healthcare have combined in ways previously unimagined, and other long-anticipated converging industries such as construction and energy (think Tesla) along with retail and technology (Amazon is the leader here, along with many other companies who are breaking into the e-commerce space or revolutionizing retail experiences).
Yet not all deals are going smoothly. AT&T has offered $85.4 billion for Time Warner, Inc., but are currently being blocked by the Justice Department. The lawsuit scheduled for March 19 could impact other companies looking to acquire, especially if they are larger or closer to the spotlight. With Amazon purchasing Whole Foods in 2017, whispers of a Target acquisition have already started amidst controversy regarding the initial merger. Whether it’s a rumor or not, it poses an interesting question to the company’s strategy.
While there’s no telling what unexpected trends may rise up, continue to expect M&A to increase and be a popular topic in 2018. Regardless of scale—large incumbents or smaller startups—it’s important to ensure that the right strategy and tools are being used throughout the process. A comprehensive, complete contract lifecycle management platform removes the difficulties of communication, mitigates legal risk, and finalizes deals faster.