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Leading international law firm Clifford Chance today announced the results of a global executive survey about domestic and cross-border mergers and acquisitions. The results highlight the challenges today's executives face with regard to M&A activity, including legal and regulatory uncertainty. The survey also provides a clear narrative about what to expect from near-term M&A transactions: the majority of companies will grow their core business operations, do so outside their home country, and forgo independent international expansion in favor of joint ventures and local partnerships that can help conquer protectionism and successfully integrate different cultures.

The global survey, conducted in the first quarter of this year, was responded to by nearly 400 high-level executives, including 80 Chief Executives and more than 185 other C-level executives from 10 different industries. US executives made up the largest individual country segment, representing nearly a quarter of the total respondents.

When asked which options best corresponded with their organization's current growth strategy, 78 percent of all respondents said emerging and developed global markets outside their home country were their primary targets rather than domestic transactions (22 percent). In the US, executives were slightly more favorable regarding home-grown opportunities, with roughly one-third (34 percent) saying domestic M&A was their primary focus.

Asked whether they were more likely to grow their core or non-core business, the overwhelming majority (79 percent) of all respondents indicated "core" business was their main focus rather than diversification.

And when asked for their views on the biggest legal or regulatory risk for cross-border M&A transactions in the next two years, "protectionism and restrictions on level of foreign ownership" was selected most often by respondents.

As companies engage in M&A outside their home markets, they are increasingly using joint ventures and partnerships to address regulatory hurdles, protectionism concerns, and cultural differences. This is borne out by the answers executives gave when asked to identify three deal structures their organizations would most likely pursue today for M&A opportunities abroad:

• "Joint venture/partnership" was the top choice (37 percent) of respondents;
• "Partnerships with local companies" was also frequently selected (29 percent);
• "Traditional M&A" – the preferred structure two years earlier at 39 percent – fell in popularity, and is now the second option (32 percent) for today's transactions.

Collectively, these results indicate the importance of cross-border expansion for large global companies, with more than 60 percent of executives saying they expect their organizations' M&A activity in both foreign-developed and foreign-emerging markets to either continue at their current pace or grow in the next two years.

The region likely to benefit the most from global deal activity is North America (37 percent), which was selected as the region with the highest number of prime M&A opportunities. China (27 percent) was the second choice of respondents, while the UK (21 percent) and Brazil (20 percent) were also considered to have attractive M&A opportunities.

Although China finished second to North America for "prime M&A opportunities," it is also one of the countries or regions considered "most risky" for cross-border M&A, with global executives most often selecting Southeast Asia (22 percent), Russia (20 percent), and China and Sub-Saharan Africa (both 17 percent) in this category.

The survey did not always yield consensus on a global scale. When breaking down the answers received from executives in the US, Europe, Asia Pacific and the rest of the world (ROW), interesting differences would occasionally emerge. For example, when asked to cite the main reason a deal was not consummated before closing, the top answers varied significantly by region:

• US: Legal due diligence (19 percent)
• Europe and Asia Pacific: Pricing / valuation volatility (17 and 16 percent, respectively)
• ROW: Corruption; unexpected political development, and; breakdown in negotiations (all three at 12 percent)

"While organic growth remains a priority of executives, companies are actively refining their M&A strategies as the conditions for M&A activity become more favorable," said Clifford Chance M&A partner Rob Masella. "Executives considering M&A activity are positioning their teams to successfully evaluate and execute transactions in an increasingly complex business, legal, cultural and regulatory environment."

"We conducted this survey to get an even broader understanding of the concerns and aspirations of global organizations conducting M&A transactions, especially those requiring high-level international perspective and counsel," said Brian Hoffmann, co-head of Clifford Chance's US Corporate practice. "We're in a unique economic period right now – one where complex cross-border transactions, when managed correctly, can deliver significant value for companies looking to create real separation between themselves and their competitors. We look forward to sharing the results from this survey in the coming months with clients in the Americas, Europe, the Middle East and Asia Pacific."

Clifford Chance is one of the world’s leading law firms, helping clients achieve their goals by combining the highest global standards with local expertise. The firm has unrivaled scale and depth of legal resources across the four key markets of the Americas, Asia Pacific, Europe and the Middle East, and focuses on the core areas of: capital markets; corporate and M&A finance and banking; real estate; tax; pensions and employment; litigation and dispute resolution. Clifford Chance has 34 offices in 24 countries with 3,200 legal advisers. The firm also operates a cooperation agreement with Al-Jadaan & Partners Law Firm in Saudi Arabia.

Attorney Advertising: Prior results do not guarantee a similar outcome.

EDITOR'S NOTES:

1. This survey was conducted on behalf of Clifford Chance by the Economist Intelligence Unit. All executives surveyed worked for companies with a minimum of US$1 billion in revenue, with more than a quarter of the respondents working for companies that exceeded US$10 billion in revenue. The Americas, Western Europe and Asia Pacific regions each represented roughly 30 percent of the total responses, with additional responses from Eastern Europe, Latin America and the Middle East / Africa. Industries represented included: oil and gas; power generation; healthcare; metals and mining; consumer goods; retailing; technology; telecommunications; pharma and biotech; and media and publishing.

2. Clifford Chance's corporate practice, which comprises 750 legal advisers worldwide, handles some of the world's largest and most complex M&A transactions. The practice combines global transaction capability with a full service of US, English and civil law expertise in the key financial centers across the Americas, Europe and Asia. In addition to mainstream M&A, the firm also encompasses leading specialist practices in: commercial contracts, competition and antitrust, communications, energy, healthcare, financial institutions, funds, investment banking, insurance, media and technology, and private equity.