Appetite for M&A Deals at Six Year High
2015 was a thriving year for global M&A activity, with the first six months seeing record deals worth more than $1.8 trillion. However, recent reports have suggested that 2016 has the potential to put that figure in the shade.
The USA has taken the lead in M&A activity thanks to a strong dollar, lower borrowing costs and healthy earnings. China has also been active among growth markets with deals in G7 countries amounting to $497 billion, an increase of almost 70% from last year.
According to information complied by Ernst and Young Global, almost 60% of companies are looking to engage in acquisitions within the next 12 months. Furthermore, over 80% of executives anticipate that M&A activity will increase in 2016.
The strongest sectors for M&A interest and activity are oil and gas (69%), mining and metals (67%), consumer products (67%), diversified industrial products (66%) and power and utilities (65%). Particular investment focus is anticipated in the government and public sectors, retail, wholesale and manufacturing.
Geographical boundaries for M&A are also blurring, with cross-border deals said to be attractive to 70% of EY’s respondents. Although 29% plan to concentrate on domestic markets, 26% have indicated that they intend to invest in the Eurozone. Current fluctuations within Europe, combined with political stability and the abundance of high-quality assets, make it an attractive area for activity.
Overall, the USA, the UK, Germany, China and India are the top five favoured destinations for investment, while companies based in Brazil, the US, France, Germany, Australia and the UK are preparing to invest most heavily. Forty percent of EY’s respondents indicated an intention to allocate at least 10% of their acquisition budgets to investment in emerging markets.
The most common reasons cited for M&A activity in 2015 included the appetite for competitive advantage, a focus on enhancing innovation and the retention of market share. We are now witnessing M&A activity with a long-term goal to build sustainable business strategies for the next decade.
If you are considering a merger or acquisition and would like professional and discrete advice, talk to Benchmark International. With representation throughout the Americas, Europe, Africa and Asia, Benchmark can connect you with the right opportunity. To find out more, visit www.benchmarkcorporate.com.