Merger and acquisition deals expected to increase in 2012
With more cash on hand than ever as well as low interest rates, companies are likely to boost their merger and acquisition activity this year, according to a new report.
Of the 825 executives surveyed by audit and tax advisory firm KPMG and the research arm of the University of Pennsylvania’s Wharton School, Knowledge@Wharton, 34% said they’re feeling more optimistic about deal-making this year. About four in 10 feel the same as they did last year; only 2% are significantly less hopeful.
Some concerns still loom: The job market, though improving, is sluggish; Europe’s fiscal situation remains uncertain; and the upcoming U.S. presidential election leaves investors in the lurch. Two-thirds of survey respondents said they don’t expect the economic recovery to arrive before the end of 2013.
Still, companies have been hot for deals for months, even though many contracts are now smaller than in their heyday.
“There is a lot of cash on corporate balance sheets sitting here today, and in the U.S. the debt markets in general are favorable,” said Dan Tiemann, who leads Americas transactions and restructuring for KPMG, in the report.
In the U.S., the value of mergers and acquisitions last year topped $1 trillion – the highest amount since 2008 and a 15% increase from 2010, according to Dealogic.
As emerging markets come more into play, private equity buyouts are also on the upswing. The $277.7 billion in deals last year reached a three-year high.
Nearly seven in 10 of the executives surveyed said they expect their companies to make at least one acquisition this year, compared to the 57% who said the same last year. The top reasons to do so: Expanding their geographic reach, entering new lines of business and expanding their customer base.
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