M&A 2019 Annual Review

Several trends are likely to affect deals in 2020: • Take Privates of U.S.-Listed China Businesses – As U.S.-China trade tensions and national security-related investment restrictions in the U.S. continue, U.S.-listed companies with most or all of their operations in China may seek a secondary listing outside of the U.S. The next step could be another wave of take privates as those companies withdraw from U.S. capital markets. • Sales of China Businesses of U.S. and European Companies – Some U.S. and European companies, especially those that are consumer facing or that seek to sell technology to Chinese companies, may feel “unwelcome” in the Chinese market, leading to the sale of controlling stakes in the China businesses of such companies to Chinese companies (for example, the sale of a majority stake in Carrefour’s China business to Suning (a large, non-state-owned Chinese conglomerate) completed in September 2019). • Consolidation in Healthcare and Education Sectors – The healthcare and education sectors in Asia have benefited from the growth of the middle class in Asia and encouragement by Asian governments of increased consumer spending. Both of these sectors have presented opportunities for consolidation. • Sales of Non-Core Businesses – If the economy in Asia sours further in 2020, more companies may seek to sell non-core businesses as they try to raise funds and refocus their businesses. • Increasing Activity in Japan – The volume of PE buyouts in Japan is expected to continue to increase in 2020 as a number of major funds (such as Bain and Carlyle) have indicated they are raising new or additional Japan-focused buyout funds and as the Japanese government continues to press listed conglomerates to spin off subsidiaries to improve corporate governance and reduce conflicts of interest. 7 BREXIT TO GET DONE The uncertainty of Brexit cast a long shadow over the UK political scene and domestic M&A market following the Brexit referendum in 2016. During that time M&A activity and investment in relation to UK-based businesses was largely put on hold by many potential market participants, since it was unclear whether Brexit would take place and whether any Brexit would be with a withdrawal agreement between the UK and the rest of the EU or reliant on the WTO fall back position with the potential of material friction affecting exports and imports. That shadow – at least insofar as it is now clear that Brexit will indeed take place – was lifted by the UK general election in December 2019 and with that has come an upsurge of interest in UK businesses and M&A. The full details of the future relationship between the UK and the remaining members of the EU have yet to be agreed. Although that process may continue to provide a slight drag on UK domestic M&A, the main concern for cross-border European M&A is the relative weakness of the main economies in the Eurozone. In addition, Europe does not have a technology ecosystem that is as well developed as the system in the U.S., especially the U.S. West Coast. This means that there is not a comparable pipeline of large emerging companies presenting investment and M&A opportunities. More encouragingly, Europe continues to have a large number of strong strategics in a wide range of sectors who are well placed to consolidate their market positions through M&A, both in Europe and in other regions. Also, private equity sponsors participating in the European markets have similar cash fire power as private equity sponsors elsewhere. They continue to drive significant amounts of M&A business in Europe and look set to continue to do so against a background of readily available debt. “The healthcare and education sectors in Asia have benefited from the growth of the middle class in Asia and encouragement by Asian governments of increased consumer spending.” 6