Trump, M&A and noise: the outlook for IR in 2017
This article was produced in association with ELITE Connect. It was originally published on the ELITE Connect platform
As we welcome in a new year and say goodbye to a 2016 full of surprises, what can we expect from 2017? Matt Hall, co-head of UK corporate broking at Deutsche Bank, outlines the top three issues he believes will affect the investment landscape and the work of IROs over the next 12 months.
Trump and the US
Last year’s largely unexpected election of Donald Trump to the US presidency will likely dominate global markets throughout the year, according to Hall, who points to the issues of geopolitics and views around the macro being the current key drivers of equity markets.
‘The imminent inauguration of Trump will take center stage in shaping market sentiment over the coming month,’ Hall says. ‘The broader investor view ‒ and one we echo as a result of the work of our Deutsche Bank economists ‒ is that the US economy will benefit from Trump’s growth strategy. We’ve actually raised our GDP forecasts for the US over the last week or so.’
And it won’t just be the US that benefits from this strategy, he adds: ‘The bigger picture is that the global economy as a whole is expected to see benefits. We’re already seeing growing signs of life from the likes of Russia and Brazil, and there’s no doubt Trump will continue to drive market sentiment as the year progresses.’
Mergers and acquisitions
Particularly on the back of the Brexit vote and the weakening pound, the M&A market is definitely a landscape to watch, as Hall observes: ‘While it’s not necessarily happening yet to the degree first predicted in the immediate aftermath of Brexit, the backdrop for the M&A market is a healthy one, especially for large caps that are in particularly robust shape.
‘The theme that’s yet to play out is the degree to which international companies will come looking to buy UK assets, much like the Fox acquisition of Sky. We’re also seeing M&A interest filter down to the mid-caps – we advised Deutsche Post DHL on the acquisition of UK Mail for £242.7 mn ($295 mn) last year. The M&A market is definitely an interesting theme for the year ahead.’
Navigating the noise
Hall’s final point centers on the importance of IROs ‒ and companies in general ‒ knowing and communicating their long-term story. ‘If equity market sentiment is driven by what’s going on in the macroeconomic world, you may find the share price sentiment is focused not on how a company is performing but on which sector it’s in,’ he explains.
‘The advice we give our clients is to focus on what you can control, and the share price will sort itself out. Over the long term, management teams that show they can navigate their companies through the more unpredictable times get rewarded by shareholders, regardless of what’s happening in the broader economy. An IR strategy of reminding people of the drivers of one’s own business is definitely the right approach.
‘IR has both an external and internal role, and part of that internal role is educating employees and shareholders what the drivers of share price market sentiment really are. We’re finding more and more that we’re being asked to help companies explain to their workers – right down to those on the factory floor ‒ what’s going on in the stock market and how it affects the company.’