Organizations seeking smaller, tech acquisitions to drive transformation; regulatory change hasn’t inhibited deal making
According to a recent survey by KPMG LLP, the audit, tax and advisory firm, U.S. merger and acquisition (M&A) activity is expected to remain steady in 2017, compared to deal levels of 2016. Of nearly 100 respondents to KPMG’s M&A Market Pulse survey, 83 percent anticipate that they will have completed at least one deal by the end of 2016, and 84 percent indicated that they will initiate at least one transaction in 2017.
Limited organic growth options are primarily driving deal activity, according to 40 percent of respondents, followed by leveraging M&A to respond to transformation in the broader marketplace, said 25 percent.
To view more survey details and findings, visit https://info.kpmg.us/ma-survey-2017.html.
“The fundamentals for a strong deal market continue to persevere, with corporates holding record amounts of cash and interest rates remaining historically low. The C-suite recognizes that acquisitions can enhance their current business models and platforms and reduce the time to market,” said Dan Tiemann, KPMG’s U.S. lead for Deal Advisory and Strategy.
Tech Industry Leads in Expected M&A Activity
Among the industries expected to have high levels of M&A are technology (45 percent), oil and gas (28 percent), and biotechnology/pharmaceuticals (22 percent). Seventy-eight percent indicated that their deals will be valued below $500 million.
Tiemann adds, “We anticipate smaller, technology acquisitions to wrap around all industries. Technology is key to driving growth for all organizations in today’s disruptive environment; it’s needed to expand capabilities, products and services.”
U.S. Top Geographic M&A Destination
M&A investments will be local, with the vast majority of respondents expecting their respective deal activity to take place in the U.S. (79 percent). Thirty-eight percent expect their M&A investments to be in Western Europe. “South America and India have infrastructure that isn’t well developed, and China’s economy has been experiencing a decline in growth rates. With the most stable economies, the U.S. and Western Europe are the most attractive geographies for deal activity,” according to Tiemann.
Regulation Not Slowing Down Deals
Respondents indicated that if their deals didn’t transpire over the last 18 months, it wasn’t due to regulatory change (four percent). Valuation issues (36 percent), competitive bidding (22 percent) and issues uncovered during diligence (22 percent) were the leading reasons deals fell through. “We continue to see a gap between buyers and sellers as they pursue the transaction process – but, most buyers will pay a premium if the right target meets their organization’s strategic needs,” says Tiemann.
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm affiliated with KPMG International Cooperative (“KPMG International”). KPMG member firms have 174,000 professionals, including more than 9,000 partners, in 155 countries. Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates.
KPMG LLP surveyed 94 corporate and private equity deal leaders in the U.S. across all industries in October 2016. For more information, visit https://info.kpmg.us/ma-survey-2017.html.