Crystal ball

2014 US deal activity will be steady, says EY

US executives are confident about 2014 deal activity, but increased volumes will rely on clear signs of an improving economy and political stability, according to EY Americas transaction advisory services.

US M&A activity declined 9.2 per cent in 2013, with 7,656 deals this year compared to 8,428 last year.
 
Meanwhile, US deal values grew to USD838.6bn in 2013 from USD685.2bn in 2012, a 22.4 per cent increase, due to a number of headline-grabbing mega-deals. 
 
Although there has been a drop in overall deal activity over the past 12 months, 41 per cent of US executives expect to pursue an acquisition over the next year, compared with 23 per cent a year ago, according to EY's latest US Capital Confidence Barometer.
 
Moreover, 51 per cent of respondents are confident about the likelihood of closing acquisitions over the next year, up from 33 per cent a year ago, and nearly half of the US executives surveyed are positive about the quality of acquisitions that will be available.
 
"We didn't see the uptick in deal volumes this year that we would have liked, but executives may have a reason to be optimistic about M&A activity for the next year. However, we are unlikely to see a huge surge in deal number as most CEOs remain hesitant to bet on M&A," says Richard Jeanneret, Americas vice chair, transaction advisory services for the EY organisation. "In 2014 we may see a modest uptick in M&A if the improving economic sentiment continues, but the political uncertainty surrounding tax policy, the fiscal cliff, QE and healthcare reform has made executives risk averse and we don't expect many CEOs to fire the M&A cannon."
 
Sectors to watch for 2014 include those that are experiencing transformation. While they may not all see a surge in deals, technology, life sciences, healthcare and consumer products will be the sectors to keep tabs on next year as these industries rapidly evolve.

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