THE US-ISRAEL LEGAL REVIEW 2019

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108 The US-Israel Legal Review 2019
US: MERGERS & ACQUISITIONS
Dealmakers will still see the value in cross-
border transactions, but geopolitical and trade
issues are making the landscape increasingly
difficult to navigate.
DIGITALIZATION DRIVES DEALSThe TMT sector, which has been one of the most
active industries for M&A since the financial
crisis as mobile, content, internet and data
services converge, has had a busy period. Sprint
and T-Mobile, which called off merger talks a few
years ago, have now reignited their plans with a
proposal for a US$60.8 billion tie-up. The deal still
requires Department of Justice (DOJ) and Federal
Communications Commission (FCC) approval,
but after the Supreme Court ruled against a DOJ
suit to block the merger between AT&T and Time
Warner, there is optimism that the Sprint and
T-Mobile deal can cross the line at the second
attempt. Major strategic realignment in sectors like
healthcare have also supported megadeals. The
largest US deal of the year, Cigna’s US$67.6 billion
acquisition of Express Scripts, followed moves
by technology companies to disrupt incumbent
players in the healthcare industry. Amazon, for
example, has partnered with Berkshire Hathaway
and JPMorgan Chase to form a not-for-profit entity
that will use big data and other high-tech tools
to improve healthcare costs for their employees.
Deals such as Cigna’s move for Express Scripts
and CVS’s purchase of Aetna for US$67.8 billion
show that established healthcare businesses are
turning to M&A to build scale and take control of
supply chains in response to moves from digital
disruptors. Healthcare is hardly the only sector
undergoing change driven by technology, as
companies in all sectors are developing tech plays
and look to M&A to capture human intellectual
capital and intellectual property.
US MARKETS BUFFER HEADWINDSDealmakers have had to negotiate an unpredictable
year and headwinds are building, but corporates
will continue to turn to M&A when they see
strategic assets that enable them to build scale
and respond to shifts in business models. The US
market is set to remain an attractive destination
for investors going forward, even with material
uncertainty. While a US recession may not be
imminent, potential buyers must prepare for one,
when considering their M&A strategies.
FOUR TRENDS MOVING THE US M&A
NEEDLE IN 2019The past year has been mixed for US M&A markets.
Deal value is up by more than a quarter and
domestic dealmaking is thriving. However, inbound
deal activity has plummeted and dealmakers are
wary about the impact that tariffs, a tougher CFIUS
regime and a downshift in the cycle could have
on deal markets in the year ahead. Here are four
trends that will shape dealmaking in 2019.
1. Domestic market remains buoyantDomestic transactions are likely to thrive in
2019. Corporate balance sheets are still healthy,
which could enable companies to pursue deals,
despite geopolitical and economic uncertainty. Our
survey bears this out. More than three-quarters
of respondents see the US as the most attractive
country for M&A in the next 12 months. And many
feel that a stable economy andmoderate GDP growth
will lead to an increase in domestic dealmaking.
Meanwhile private equity is becoming even more
competitive and has near-record dry powder to put
to use. The battle for the best assets is likely to drive
valuations even higher, but even high prices are not
likely to deter more determined dealmakers.
The US market is set to remain
an attractive destination for
investors going forward, even
withmaterial uncertainty.
While a US recessionmay not be
imminent, potential buyers must
prepare for one.