After a 2017 wrought with uncertainty, next year is on pace to return markets to a more robust dealmaking environment.
"Boards have been reluctant in an uncertain environment to engage in mega transformative type transactions," said Latham & Watkins LLP partner Adel Alsani-Far at The Deal Economy Conference. "That's just not an environment when someone's wades into something new bold and big. I do think that's going to change though."
As the possibility of increased legislative action increases, dealmakers have begun anticipating an opportune time to enact change at their firms. Here's why dealmaking is going to get even hotter in 2018.
"Boards are not going to sit on their hands forever," said Alsani-Far, who was part of the Latham team that advised Evercore Partners on its Whole Foods Market Inc. assignment, which eventually led to the Amazon.com Inc. (AMZN) acquisition.
Tax reform on tap
While tax reform remains a nebulous market factor, the likelihood some form of tax legislation passing in the next year is growing. With that, investors are looking for a more favorable corporate tax rate next year after waiting most of 2017 to see change.
But any slowdown in dealmaking throughout the last year wasn't a direct implication of the lack of tax reform, William M. Casey, EY Americas vice chair of transaction advisory services, said.
"No one is waiting right now," Casey said. But even as firms have held off on big deals in the last year, it's not tax reform that's held them back, but rather the uncertainty legislation breeds.
A White House intent on enacting legislative change after a stop-and-go 2017 could reduce the frothiness of the dealmaking market moving into the New Year.
David Wicks, VP of listing services for Nasdaq, said the exchange is working to bend the ear of the Trump administration in order to achieve the most favorable dealmaking environment possible. And that bid has worked, Wicks added, as the number of firms somewhere in the process leading to an IPO has been sustained.
"That pipeline leading into 2018 is at healthy levels," Wicks said. But still, 2018 holds hope for even further regulatory easing that will make it a banner year for dealmaking.
"The hope is that there is what the expectation was -- that you're going to have an easing up of the regulatory levels when it comes to easing deals through," said Latham's Alsani-Far.
Casey said the U.S. and Canada still lead the investment market when it comes to dealmaking, but China is coming in hot. This year could surprise market players as the country enters the main stage for striking deals.
"A lot of investors are getting more comfortable transacting in China," Casey said.
Tapping into a new market -- with enormous potential -- could open up the global dealmaking market even further. The drive into China has been propelled both by an integration of the Chinese corporate culture with government regulation, and the sheer size of the Chinese market.
Can't join the crowd at the Essex House in midtown Manhattan? Tune in to a webcast of The Deal Economy Conference here, or stay tuned to The Deal and sister publication TheStreet.com, which will be posting stories all day from the event.
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