Risk Management

M&A Pros Expect Very Active Deal Scene in 2015

"Buyers are paying a premium for targets that will allow them to realize long-term strategic goals," says KPMG.
Matthew HellerDecember 2, 2014
M&A Pros Expect Very Active Deal Scene in 2015

M&A professionals expect 2015 to be an extremely active year for deals, reflecting confidence that economic and market conditions in the U.S. will remain positive, according to a new survey.

KPMG and Mergers & Acquisitions magazine said 82% of those who responded to their 2015 M&A Outlook Survey Report anticipate that their companies or clients will initiate at least one acquisition in 2015, up from 63% in 2014.

Valuations are also expected to increase year over year, with fewer M&A professionals expecting to pursue deals under $250 million, and more respondents expecting to do deals valued upward of $250 million, $500 million and $1 billion.

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“Economic fundamentals that drive M&A are back at pre-crisis levels, with corporations holding large cash reserves, interest rates remaining historically low, consumer confidence improving and the U.S. dollar becoming stronger,” Dan Tiemann, KPMG’s national leader for transactions & restructuring, said in a news release.

Despite the apparent enthusiasm for M&A, 38% of respondents plan to increase revenues through new product development, 28% intend to achieve growth through geographic expansion and 18% plan to enter new market segments.

But Tiemann noted that organic growth “often offers limited growth prospects, so buyers are paying a premium for targets that will allow them to realize long-term strategic goals and gain an advantage over the competition.”

In the first three quarters of 2014, the report noted, the value of deals in the United States reached almost $1 trillion, up 33% from 2013, and the number of deals reached 5,843, up 7%. Mega-deals included the $71 billion consolidation by Kinder Morgan of several related entities and the $43 billion acquisition of Covidien by Medtronic.

Forty percent of survey respondents cited large cash reserves as the main driver of deal activity next year, followed by opportunities in emerging markets (19%), credit availability on favorable terms (16%), improved consumer confidence (13%) and improving equity markets (8%). But 27% of respondents believe activity could be deterred by a lack of suitable targets.

“Finding assets that will generate returns to satisfy investors has proven difficult for corporations and private equity firms alike,” Tiemann said.

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