The fundamentals for strong merger and acquisition activity remain in place despite a slowdown in US M&A activity in the first half of 2013, according to PwC US.
Buyers remain extremely active in identifying, evaluating and competing to acquire assets in the market.
Dealmakers are placing a premium on deal certainty, speed and agility to ensure successful deal outcomes that deliver long term value, according to PwC’s US mid-year M&A outlook.
In the first half of 2013, there were a total of 4,587 total transactions, representing USD528bn in disclosed deal value, according to data compiled by Thomson Reuters and analysed by PwC. Accelerated deal flow in the final months of 2012, a constrained supply of assets for sale, and a lack of confidence in executing on transactions contributed to a drop in deal activity in the second quarter of 2013. As PwC expected in its 2012 year-end M&A outlook, the middle market continued to prop up activity, accounting for 28 per cent of value through June 30, 2013.
"Challenges in the M&A market are being driven by a lack of well-positioned assets for sale, not poor deal fundamentals," says Martyn Curragh, PwC’s US deals leader. "A shortage of quality assets and a growing list of willing acquirers dictate a need for confidence and greater preparation to execute, from deal strategy through integration. Greater competition is driving valuations and deal timelines, leaving some would-be acquirers to reflect on missed opportunities, and others with buyers’ remorse for failure to capture deal value."
According to PwC’s 16th annual CEO Survey, CEOs are bullish with at least 75 per cent expecting growth over the next year through both organic means and acquisitions. Nearly half of US CEOs said they plan to do a deal in 2013, indicating that dealmaking remains top of mind for business leaders, however, less than one third of those US CEOs seeking a deal completed one in the preceding 12 months. This shift in frequency – and the pace of individual deal participants – is one factor impacting how deals are being executed in today’s increasingly competitive market. With readily available financing, corporate cash levels at USD1.29trn, and strong equity markets, PwC expects the combination of these critical factors to support sustained deal activity through the remainder of 2013.
"Corporates are seeking opportunities to grow with a strong focus on strategic fit, value creation, and execution certainty. Companies of all sizes, and across all industries and regions, are looking for the right synergies to provide long term growth," says Curragh. "In this slow growth environment, buyers are taking on an ownership mindset earlier in the process, with a focus on agility, speed and flawless execution. Those who are unable to adjust their strategies and integrate quickly may be left second guessing their decisions."
