Merger and acquisitions (M&A), private equity and tax professionals from the technology, financial services and healthcare sectors expect an increase in their companies’ or clients’ deal activity in 2013 compared to 2012, according to a survey conducted by KPMG.
Of the more than 400 survey respondents, 60 per cent said that they would do more deals this year than last year.
The simpler financing terms associated with smaller deals, as compared to both large transactions and the megadeals, will drive middle-market M&A activity in the balance of 2013, according to 24 per cent of the poll population. However, 49 per cent of respondents felt that collectively, simpler financing terms, fewer risks and integration challenges, as well as the less complexity of due diligence that’s needed for deals valued under USD250m, will serve as the catalyst for a deal market dominated by middle-market activity in 2013.
In fact, 22 per cent of survey respondents indicated that in 2013 thus far, the deal market is already experiencing a high volume of middle-market activity; they also acknowledged favourable credit terms (11 per cent) and elevated levels of cash on corporate balance sheets (eight per cent) as driving the recent deals in the marketplace. Corporate buyers have the advantage in the M&A space over private equity buyers (six per cent) halfway through the first quarter of 2013.
"The underlying fundamentals in the deal market are improving, with the combination of a stabilising US economy, favourable credit terms, open debt markets, and high cash balances paving the way for an increase in M&A volume this year," says Dan Tiemann, Americas lead for KPMG’s transactions and restructuring practice. "As a result, companies may be highly motivated to execute transactions that drive their growth agendas, including deals that allow for business transformation and optimize new operating models."
When asked what effects new regulations might have on their ability to do deals in 2013, 21 per cent of the poll population stated that they will cause integration challenges during the M&A process and in post-deal phases for their companies and clients. Eighteen per cent cited that new regulations have temporarily delayed their ability to do deals, followed by seven per cent who have delayed M&A activity indefinitely; however, another seven per cent cited they will actively pursue deals because of new regulation.
Executives plan to selectively invest in emerging markets outside of the US, with China/Asia Pacific cited as the leading target region (20 per cent), followed by Brazil/Latin America (17 per cent), Western Europe (10 per cent), India (four per cent), Russia (two per cent) and Eastern Europe (two per cent). Forty per cent of the poll respondents indicated they do not plan on investing in any of these emerging markets in 2013, congruent with KPMG’s M&A Outlook Survey 2013 conducted in November 2012 where respondents stated the vast majority of deal activity would take place in North America.
The breakdown of respondents includes M&A professionals in the following sectors: technology (17 per cent); financial services (17 per cent); healthcare (14 per cent); diversified industrials (nine per cent); energy (eight per cent); and consumer markets (seven per cent).
