Upbeat Merger & Acquisition Forecast

Mergermarket and Merrill DataSite combined to produce a new survey of the nature of deal-making in the next 12-24 months. The survey was based on interviews with private equity practitioners, corporate executives, legal advisors and financial advisors in 3 regions – North America, Europe and the Asia-Pacific region.

The overall expectations for deal-making are bullish, with 90% predicting an increase. In North America, 95% predicted an increase. The sectors with the most deal-making potential in North America are expected to be TMT (Technology, Media and Telecommunications), Energy/Utilities, and Healthcare/Pharmaceuticals.

Across regions nearly 80% expected economic conditions will improve at least moderately. In North America, 74% expected moderate improvement, but less than 1% expected significant improvement. European and Asia-Pacific respondents were more bullish on the global economy, with 8% and 10%, respectively, expecting significant improvement.

The valuation climate (the gap between seller and buyer perceptions of value) remains a concern, but 75% of North American respondents expect that gap to narrow. Overall, the respondents were split on whether this is a buyer’s or a seller’s market. (This corresponds to my view that we’re in a normal range of valuations right now – not too hot, and not too cold.)

Availability of financing is linked to valuation, and survey respondents thought it was still an obstacle that could stop or stall closings of M&A transactions. They expect financing will be easier to obtain, but they do not expect a return to pre-credit crisis levels. (In general, that means that valuations will not get over-heated, as long as lenders’ memories of their losses remain.) While acquisition debt will be easier to obtain, buyers should expect more covenants, and deals will not be over-leveraged.

What does all this mean to you if you’re a business seller? It means that there will be a considerable appetite among buyers for buying businesses in the coming 12-24 months – perhaps that means businesses like yours. It means the buyers will be paying reasonable prices, but not wild and crazy prices. It also means that the acquired company will not be over-leveraged, and will therefore have a better chance to survive any future downturn in the economy. If you want to know what the latest market trends mean specifically for you and your company, contact us via our web form or give our ACT professionals a call at 866-744-5422.

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