NEW YORK, April 21, 2015 /PRNewswire/ -- According to
the findings of the second annual Deloitte "M&A Trends Report
2015," an overwhelming majority of 2,500 executives at U.S.
corporations and private equity firms polled expect the robust pace
of mergers and acquisitions to extend — or even accelerate — in
2015.
Last year demonstrated an M&A revival, as 9,802 U.S. deals
with an aggregate value of more than $1.5
trillion were reported. The start of 2015 is continuing the
momentum, with $414.7 billion worth
of U.S. acquisitions announced in the first quarter, its largest
first quarter since 2000, according to Fortune. True to this trend,
85 percent of corporate executives and 94 percent of private equity
respondents surveyed expect the pace of M&A activity to sustain
or ramp up from 2014 levels in the next 12 months. That's
consistent with expectations a year ago, when 84 percent of
corporate respondents and 89 percent of private equity executives
said they expected activity to remain the same or accelerate.
"We are seeing very bullish M&A activity in a variety of
sectors," said Tom McGee, vice
chairman and national managing partner, Mergers & Acquisitions
Services, Deloitte LLP. "For companies large and small, public and
private, the availability of inexpensive financing, surging equity
markets and an urgency to deliver growth has positioned the U.S.
potentially to hit pre-recession M&A activity levels in
2015."
The "M&A Trends Report 2015" builds on research from the
inaugural "M&A Trends Report 2014" providing insights into
future M&A activity, as well as deal dynamics. Year-to-year
survey results reveal a significant uptick in anticipated
transformational transactions, divestitures and use of data
analytics. In addition, the report sheds light on top sectors and
geographies, but also the continued sentiment that many deals fall
short of expected returns.
Increased Transformational Focus
Close to 1 in 4
corporate respondents (24 percent) indicate they plan to seek out
major transformational transactions, an increase of 5 percent from
last year's survey. On the private equity side, over half the
respondents (55 percent) expect enterprise value for acquisitions
to be at least $500 million.
Divestitures Seen Increasing
Expectations remain
sky-high for increased divestments of private equity portfolio
companies, with about three quarters of private equity firm
respondents, up from two-thirds last year, anticipating an
accelerated level of exits within the next 12 months. On the
corporate side, there also are expectations for greater divestiture
activity this year. Almost 4 in 10 company respondents report they
anticipate shedding a business in 2015, up about a quarter from
2014's responses. This trend is being fueled mainly by a greater
strategic focus on core assets and reactions to marketplace
changes.
Data Analytics Use Poised to Grow
More companies and
private equity firms are turning to technology-driven data
analytics to analyze M&A transactions. On the corporate side,
two-thirds of respondents said they deploy data analytics in at
least select areas of their deal analysis, up from 58 percent in
2014. On the private equity side, the use of data analytics also
increased in the past year, and is even more ubiquitous. More than
75 percent of private equity respondents say they use these tools
in at least select areas, up from about 70 percent a year
earlier.
Persisting Strength in Multiple Sectors and
Geographies
From a sector perspective, technology was tipped
as the top industry (29 percent) for the second consecutive year.
Despite a decrease in oil prices, energy, specifically the oil and
gas subsector, surged to second in the ranks (25 percent), with
health care plans and providers in third position (20 percent).
Overseas expansion continues to be a focus with a greater number
of corporate and private equity respondents saying in the 2015
survey that they expect to invest or acquire businesses in foreign
markets, up from 58 percent and 73 percent, respectively, last
year. The top three overseas targets for corporate executives are:
China (24 percent), Canada (23 percent), and the U.K. (19
percent). While China remains the
top foreign target, the reported percentage is a sharp decline from
2014 when 33 percent cited it as the top foreign destination. Among
private equity leaders, the top three overseas markets are:
Canada (32 percent), the U.K. (30
percent), and China (27
percent).
Deals Continue to Fall Short of Expected Return
Despite expectations for another blockbuster year, almost 90
percent of respondents said completed transactions have fallen
short of generating expected return on investment, the same as last
year. On the private equity side, 96 percent of respondents
indicated that some portion of their deals fell short of targeted
returns. These findings are in line with results from Deloitte's
"Integration Report 2015," which focused on the post-merger
integration phase of the M&A lifecycle
Conclusion
The year ahead shows promise for an
increased number of deals and potentially larger value
transactions. The optimism is a reflection of an ideal M&A
environment that includes ample cash on corporate balance sheets,
affordable debt thanks to low interest rates, strong equity
markets, and a stable economy forecast to grow at a steady
pace.
"The table is set for 2015 to be another strong year for
transactions and we've already seen robust deal-flow in the first
few months of the year," concluded McGee. "Our second annual
M&A trends report shows corporations and private equity firms
are pursuing a greater number of targets in more sectors, more
markets and, often, with more money."
Research Methodology
From Jan.
28, 2015, through Feb. 10,
2015, a Deloitte survey conducted by OnResearch, a market
research firm, polled 2,092 executives at U.S. companies and 408
executives at domestic-based private equity firms in order to gauge
their expectations and experiences for merger and acquisition
activity in the next year or two.
About Deloitte M&A Practice
Deloitte advises
corporate buyers and private equity investors throughout the entire
M&A deal lifecycle from strategy development to selecting the
right partner and from conducting thorough due diligence to closing
the deal. Throughout the integration process or even through a
divestiture, we align our services to address clients'
transactional and integration needs, all with the goal of building
value for our clients. View the entire report.
As used in this document, "Deloitte" means Deloitte LLP and its
subsidiaries. Please see www.deloitte.com/us/about for a detailed
description of the legal structure of Deloitte LLP and its
subsidiaries. Certain services may not be available to attest
clients under the rules and regulations of public accounting.
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SOURCE Deloitte