M&A

Return of the Dealmakers

An improving economy will be the biggest contributing factor to a heady M&A environment in 2005, say more than half of respondents to a new survey.
Stephen TaubMarch 9, 2005

Nearly 90 percent of tax and finance executives and other senior professionals said that their company expects to complete at least one merger or acquisition in 2005, according to a recent survey conducted by accounting firm KPMG.

Last year, when about 70 percent of respondents to KPMG’s prior survey responded in the affirmative, there were 30,590 completed mergers and acquisitions worldwide, according to the firm, which cited Thomson Financial data.

Other key findings, based on answers from 112 respondents:

• More than 50 percent said they believe mergers and acquisitions have a positive impact on a company’s stock price; 34 percent said the impact is negative.

Of course, target companies’ stock prices usually fare better initially.

• 54 percent said the improving economy was the factor that will most affect M&A in 2005; other key reasons were international events (20 percent) and increased stock prices (14 percent).

• 56 percent of respondents cited “hidden liabilities” in acquired businesses as the biggest M&A tax challenge, followed by compliance with changing tax laws (17 percent), integration with their tax department (14 percent), and prior acquisition planning (13 percent).

• For 83 percent of respondents, deal structuring (48 percent) and due diligence transactions (35 percent) absorbed most of their time in M&A tax activity in 2004.

• Respondents predicted that high technology (16 percent), financial services (16 percent), and health care (15 percent) will be the most active industries in M&A in 2005, followed by telecommunications (13 percent), consumer products and services (11 percent), and energy and power (10 percent).

• 47 percent of respondents expect that their transactions this year will between $50 million and $500. In 2004’s KPMG survey, however, only 34 percent of respondents expected their M&A transactions to fall in that range 49 percent expected a transaction value lower than $50 million.

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