Will 2014 be the long anticipated time for the breakout of M&A deals? Or, another year of post-2008 uncertainty?
As has been the case for several years, 2014 looks like it could signal the beginning of a surge in M&A deal-making. The revival has been anticipated since the beginning of the financial crisis some five years ago, but each year as we view the fundamentals, the positive signs haven’t generated the expected volumes.
Things may be changing….. At this writing:
- Confidence seems to be returning as reflected by strong deal volume in the last two quarters
- Companies still have healthy balance sheets with pent-up capital wanting to be deployed
- Credit-worthy companies are able to take advantage of historically low interest rates
- A global economic recovery may be underway with the United States being the largest target marketplace
- Private equity is trending upward with portfolio assets continuing to change hands
With the exception of the U.S. government shut-down and debt-ceiling fiasco, there has been little to reduce investor confidence. So, maybe this year.
One of our great partners in the Council from whom we receive the best in global intelligence is Mergermarket, www.mergermarket.com. They are able to keep us informed at all times as to what is happening around the world, from Rumors to Announcements to Post-Transaction results. Here is a sampling of what you might want to base your 2014 forecast for M&A deal activity:
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Global Pharma, Medical and Biotech Trend Report
- Global activity has increased 26.1% over last year through October to US $141 bn-worth of deals
- After a drop in M&A value in Q1, Q3 showed a sharp increase of 81% over the same period last year
- The Deal value this year is on target to at least match last year
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Global Consumer Trend Report
- Global activity in this sector fell 9.7% from the prior year through October. Note: 2013 will mark a reversal of three successive years of deal value increases
- US $63.2 bn-worth of deals in Q3 represent a 10.5% decrease in value from the previous quarter. The decrease follows a drop in deal count to the lowest amount of announced deals in any quarter since Q2 2010
- The Consumer sector accounts for 12% of aggregate Global M&A so far this year
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Global Technology, Media & Telecommunications Trend Report
- TMT activity totaled US $438.5 bn through October – an increase of 61.6% above same time last year
- This is the highest 10 months’ value since 2006 (US $465.1 bn) as a result of 13 mega-deals
- TMT accounted for 25.1% of Global M&A activity this year and overtook the Energy, Mining and Utilities sector for the first time since 2006
Overall I remain encouraged that M&A must become the driving force for corporate growth in this world so full of challenges to aggregate growth opportunities. Industries will continue to survive by consolidation, yet new markets will open and a vast new selection of technologies will emerge. Things will change but some of the best things, like friends and family, will stay the same….. thank goodness.
Have a Merry Christmas and a Great New Year,
Jim