Dr. Florian von Alten, Managing Partner of Oaklins Germany, Dr. Michael Drill, CEO and Managing Director of Lincoln International, Dr. Ralf Schremper, Partner of Oakley Capital, Michael Siefke, Managing Director of Bain Capital together with panel head Dr. Nikolaus von Jacobs, partner at McDermott Will & Emery, discussed the M&A and Private Equity Market in 2018.
The panel dove right into the current private equity market of 2018, mainly addressing the effects of the current trade tensions and the ways in which they are influencing the M&A market.
Immediately it became clear that during trade conflicts legal advisory takes on a central role.
The panellists observed a negative influence of the current trade conflicts—especially the tensions between the United States and China—on the entire M&A and private equity market, even though the European markets are currently still booming. Subsequently, US firms currently orientate their investment and business strategies towards Europe rather than China. Respectively, the German Mittelstand seems to be pursuing a similar strategy, investing in and multiplying the ties with the United States. Therefore, the current trade tensions between the United States and China trigger increased M&A activity between Europe and the United States.
Dr. Michael Drill emphasized that Chinese businesses investing in Germany are faced with new obstacles resulting from the new regulatory measures adopted by the German government to protect crucial sectors. As a result, M&A strategies of Chinese investors have had to adapt and become much more diligent in order to avoid the German government’s hindrance on M&A transaction.
Globally M&A market transactions have become more complicated, taking more and more time and thus appearing to have become much less efficient. Even though investment controls require M&A strategies to evolve to be more careful with Chinese-German transactions, an increase in M&A transactions between Germany and China is still predicted, even after the market suddenly cooled down two years ago.
The panel then discussed the cultural gap influencing trade. It concluded that the problem in several countries is actually very seldom the buyer, but rather the regulator.
Dealing with Chinese buyers appears to come with a lot of uncertainty. However, this uncertainty does not emanate from the buyer but from the Chinese government, as Chinese firms may need a long time to get approval to litigate and transfer money or funds.
Furthermore, the panel discussed the upcoming repositioning of M&A strategies concerning the aspect of transformation. Low interest rates fuel concerns for the current M&A market and the demand increases for higher interest rates in Europe. Therefore, M&A activities are expected to decrease in the next few months and years.
Overall, all panellists agreed on a continuous change in the market sentiment. Auction trends include a much more aggressive behaviour and increased difficulties for IPOs.
Dr. Nikolaus von Jacobs,
McDermott Will & Emery