M&A

U.S. Companies Hungry for Midsize Deals

Ernst & Young survey finds a majority of U.S. firms plan to execute a merger or acquisition transaction in the next 12 months.
Katie Kuehner-HebertApril 15, 2015
U.S. Companies Hungry for Midsize Deals

U.S. merger and acquisition activity continues to pick up speed as companies practice “rational exuberance,” according to Ernst & Young’s semiannual Global Capital Confidence Barometer.

More than 61% of companies surveyed by E&Y anticipate making an acquisition in the next 12 months — the highest number ever recorded in the survey of senior executives. The most acquisitive sectors, according to the survey, will be oil and gas; technology; consumer products and retail; and hospitality and leisure.

“In 2014 we saw the strongest momentum in M&A we have seen in years, and we expect to see more companies coming off the sidelines, looking to transact this year,” Rich Jeanneret, E&Y Americas vice chair, transaction advisory services, said in a press release.

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“Our latest barometer shows the impact of both new entrants and companies returning to the deal market after a hiatus. U.S. deal pipelines in the next year should be stable and healthy, filled with a steady stream of midsize deals aimed to leverage new technologies or adjust a company’s position within its existing sector.”

Smaller, less transformative deals will be more common, as 89% of the respondents said they are planning “lower-middle-market” deals, those under $250 million in size. Companies with more than $5 billion in  annual revenues will look toward the “upper middle market” — deals between $250 million and $1 billion in size.

Most (92%) of the U.S. respondents said they are focused on cross-border transactions, particularly in Canada. “While companies remain invested in the emerging markets, nearly two-thirds of U.S. companies plan to allocate less than 10% of their acquisition capital to non-developed regions,” E&Y said.

U.S. deal making continues to lead global M&A activity, as overseas companies “are in preparation mode, they are looking at more innovative opportunities, and they are managing their capital agendas with rigor and discipline,” E&Y said.

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