Global M&A
Market Outlook

Leslie Picker: How are companies digesting the current environment in terms of whether or not they have the appetite to do deals in this environment or, you know, is 2025 looking any brighter given the whole antitrust environment?

Anu Aiyengar: Oh, there's certainly a lot of M&A news this week. We picked a good day.

Leslie Picker: We did.

Anu Aiyengar: The animal spirits are certainly back and the optimism in the business community is extremely high. The outlook for the debt markets, the equity markets, M&A markets, all for 2025, is pretty good.

That's on one side, right? And why is that? Because people expect interest rates to continue to decline, more IPOs to happen, and the regulatory framework to be less onerous, broadly speaking, not just antitrust, but broadly speaking. All of that bodes well for M&A.

And you've seen a bunch of deal activity because sometimes people say it's better to trade on the hope than wait for the reality, right? And, so, yesterday you saw a bit of a merger Monday and there is more kind of rumors and activity that you spoke about today.

On the other side, there are deals that were announced two years ago, three years ago, that have been waiting for a very long time period, and a series of them that you've seen that are not getting completed, whether it's the announcements from today or earlier on, there were a couple of deals, big deals, which were blocked also.

And, so — and you combine with that, that we still don't know exactly what policy is going to be. You know, the direction of policy. That is an expectation that all of these things will happen. But the exact magnitude of that is unknown. But having said that, the optimism right now in the business community seems pretty high.

Morgan Brennan: Just how lenient, potentially, amid all the animal spirits and all the chatter, do we actually think the Trump administration is going to be to the most dominant companies making deals moving forward?

Anu Aiyengar: Yeah. Only time will tell. And one interesting thing about this Trump 2.0 is, other than previous administrations, it's not all the same people in the same seats. In fact, there's really nobody in the same seat. Everybody is new. So you can't look at a previous track record and say it's going to be the same.

And a lot of the policy outlined leading up to the elections all point to a less government role in business. So I think that is what is driving a lot of the optimism.

Leslie Picker: How would you characterize valuation right now between potential buyers and potential sellers? Because that was blamed for activity below historical averages for a while, especially in the sponsor community where they were buying assets in 2020, 2021 at such high multiples, and so the market hadn't been able to keep pace. But now you've got the broader markets, at least at record highs, even if it's, you know, maybe not as broad as some would like it. Do you feel like that gap is narrow, to the point where we could start to see more activity, particularly in that sponsor community?

Anu Aiyengar: Yeah, I think on valuation, you have to be a lot more nuanced because when you look at the overall market, it looks like it's trading at all-time highs. Then you separate out the seven mega tech companies and look at the others, there are a lot of companies which are not trading at close to their 52-week highs. So you can still find mispriced asset opportunities and take private opportunities in the broader market.

Then you add on top of that, there are 28,000 plus portfolio companies with private equity hands, which have been in there for four plus years looking for monetization. And when you have an attractive IPO market, lower debt, and an attractive M&A market, all of that bodes well for more monetizations because they have held these assets for some period of time and need to return capital and have to deploy capital. You can only deploy capital once you return some capital. So that's a good cycle that's kind of coming into effect.

Jon Fortt: You mentioned the expectations of lower rates as being one of those ingredients fueling the animal spirits. What if rates don't continue to decline as much as some expect? And for multinational M&A, what if it's not U.S. regulators and courts that are the real obstacle, what if it’s the EU and China?

Anu Aiyengar: Yeah. And, so, China, I think, has not been a big part of the M&A market now for several years. In Europe, more of the trade is related to the valuation differential between Europe and the U.S., as well as we've seen decade-high levels of the U.K. as a target. So, the U.K. as a target, because again, of this mispricing, because when you look at the FTSE 100 companies and look at their valuation versus the S&P 500, there's almost a ten-turn differential in PE, which is one of the highest that you have seen. But the companies themselves, the majority of the earnings of those companies actually come from outside the U.K.

So it's just been an interesting dynamic, both with companies that are getting taken private or merger activity in the U.K., as well as companies looking at corporate clarity and taking advantage of the U.S. markets through spins, splits, mergers, again, as long as you can make your way into one of the U.S. indices, because being a part of the S&P 500 in some ways is the prize, because that's where you'll see the valuation differential.

You're absolutely right to add the note of caution, though, that it's not that it's all going to be, you know, sunshine and rainbows because there hasn't been fundamental change as yet. There is an expectation of change. There's change at the E.U. as well, right? That happened even earlier. And there is a lot of geopolitical risk. So there are some things to watch out for, but the fundamentals and the expectation right now is more on the optimistic side.