Acquisition momentum is expected to continue in 2016
Last year, M&A reached record levels in the U.S. and we expect the market to remain extremely active in 2016. KPMG and FORTUNE Knowledge Group surveyed over 550 M&A executives to get a forward-looking view of the deal landscape.
A Strong Appetite for M&A
When asked what factors most explained the current appetite for M&A, respondents noted the need to fortify a competitive position in current markets (58 %), as well as the need to expand beyond current boundaries and to satisfy shareholder need for growth (both 26 %).
What factors best explain the current strong appetite for M&A?
Fortify competitive position in the current market
Expand beyond current markets
Satisfy shareholder pressure to accelerate growth
Employ robust cash reserves
Enlarge global footprint
Tap surplus credit worthiness
Buyers are motivated by a desire to enter new lines of business and to expand customer reach
What is motivating this activity? The largest percentage of respondents said their acquisitions motivated by a desire to enter new lines of business (37%) or to expand their customer reach (37%). Other reasons include expanding their geographic reach (36%), enhancing intellectual property or acquiring new technologies (34%), or because a strategic target became available (25%).
What is the primary reason for the acquisitions you intend to initiate in 2016?
Expand customer base
Enter into new lines of business
Expand geographic reach
Enhance intellectual property or acquire new technologies
Opportunistic—target becomes available
Financial buyer looking for profitable operations and/or gain on exit
Invest in another function in the supply chain
Respond to activist investor
Defend against competition
Cash will drive deals
Several macro-economic factors should facilitate M&A activity in the coming year. The largest percentage of respondents (51 %) cited large cash reserves and/or commitments. Deal activity should also be driven by the availability of credit on favorable terms (36 %), improved consumer confidence (32 %), opportunities in emerging markets (25 %), and improving equity markets (17 %).
Which factor do you think will most drive deal activity in 2016?
However most dealmakers felt that current market valuations were not sustainable for their industries
Are the current market valuations sustainable for your industry?
What factors lead to deal success?
Successful acquirers focus on integration, valuation and due diligence to reach strategic goals and increase shareholder value.
Well executed integration plan
The correct valuation/deal price
Effective due diligence
Positive economic conditions
Sectors expected to have the most deal activity are those characterized by transformation
Tech acquirers are motivated by a desire to gain access to data analytics, cloud, security and the internet of things
Pharmaceuticals / Biotechnology
Pharmaceuticals / Biotechnology
Pharma companies are motivated mostly by gaining access to clinical research
The Affordable Care Act is expected to be the most significant driver for 2016 deal activity for healthcare providers.
Media / Telecom
Media / Telecom
Media/telecom acquirers are focused on mobile devices and converging technologies
M&A trends are motivated by a need for product and service growth and industry consolidation and the response to competition
Deals will be driven by consolidation of core businesses, competition and the persistence of lower oil prices
U.S. ranked the most popular deal destination
Which countries and regions are most attractive for M&A investors? A whopping 79% chose the Unites States, probably influenced by its relatively healthy economy and receptive credit markets. Survey respondents were also attracted to Western Europe (21%), North America (13%), and China (11%), as well as the rest of Asia (11%). (Multiple responses permitted).
In which regions/countries will you primarily invest in 2016?
including the U.S.)
(not including Brazil)
China or India)
Webcast: 2016 M&A Outlook
Event Overview: Listen to professionals from KPMG’s M&A practice as they discuss key conclusions from the 2016 M&A Outlook Survey findings and provide recommendations on the critical elements to achieve a successful transaction, including getting the valuation right, optimized due diligence and tax planning, and well-executed integration plans.
KPMG's Deal Advisory, Corporate Finance, Strategy and M&A Tax teams are the place to turn for a broad range of advice in your M&A transaction. We can support you with services that cover the full life cycle of a deal—and help you create the value you seek, while avoiding unnecessary surprises.
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