Divergence or convergence – just which is it?

A few weeks ago we hosted a business breakfast seminar to give our clients a deals market update. Whilst the media has been erring on the side of doom and gloom recently, our update on the economy struck a more positive note…

 

That said, two words mentioned by our speakers struck a chord with me – divergence and convergence. Yes, they’re seemingly contradictory but actually, in the context of the event when we talked about the economy, the mergers and acquisitions (M&A) deals market and international capital, they make sense.

 

Divergence

According to Andrew Sentance CBE, our senior economic adviser, we’re likely to see divergence in both emerging and developed economies. In emerging economies over the next few years, the likes of Indonesia will have higher GDP growth rates than larger the emerging economies of China and India. In developed economies, because they’re better adapted to change with a more flexible workforce, the likes of the US & the UK will grow faster than southern European economies such as Italy and France.

 

Convergence

For Chris Hemmings, our deals origination leader, the word was convergence. Private equity (PE) firms, in particular alternative asset managers, and sovereign wealth funds (SWF) are converging driven by a quest for ever greater returns on their investments. Bigger players are also increasingly partnering with PE funds to help address the lack of funding for small to medium sized enterprises (SME) that is comprised of longer term deals with lower internal rates of return (IRR).

 

So what for UK deals?

Whilst we covered a lot of ground at the event which I won’t go into here (global & local economies, GDP and economic issues as well as the debt markets and global deals) there were still some things to look forward to in future as outlined by Stuart McKee, our UK head of corporate finance.

 

We expect deal volumes to remain fairly stable, as they have been since the recession. We anticipate that deal multiples will rise for high quality assets. The technology, media and telecom sectors will be busy and important markets off the back of US investment because the US is currently a good source of both trade and PE funds. And there is renewed optimism across financial services and real estate.

 

Further information

We’ve recently published quite a bit of content that will give further colour to what we covered during our seminar so I’ve provided some links for you below:

 

 

To what extent do you expect deal volumes or deal multiples to rise during 2015? Share your thoughts on the market for deals below or schedule a meeting to discuss the relevance of market conditions to you.

Victoria Marcer | Director, Corporate Finance
Profile | Email | +44 (0)7976 738033

 

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