January 18, 2011
Another M&A Year-End Recap and Outlook
Following up on this blog predicting M&A trends for this year, here is a summary of this annual M&A year-end recap and outlook report from Ernst & Young Transaction Advisory Services (the summary is copied from a Directors & Boards E-Briefing):
2010 recap:
– It was the year of the PE comeback (global deal value was up over 90%)
– Defined by a two-speed recovery, with momentum building in emerging markets versus limited deal activity in developed markets (BRIC M&A deal value was up more than 46%)
2011 outlook:
– Companies are nervous to pull the trigger (Only 41% of companies are planning on making an acquisition over the next 6-12 months vs. 57% in April 2010)
– More focus on organic growth ( 75% of companies are more focused on organic growth vs. 66% six months ago)
– Fewer “do-or-die” transactions – more strategic M&A. Bargain-basement deals declining, valuation multiples improving
– One foot on the accelerator, one foot on the brake: Boardrooms are cautious right now, but paradoxically 50% of companies are ready to execute an acquisition at short notice – up from 36% a year ago.
– All the pieces are in place for a resurgence, but confidence and clarity about direction of economic recovery will be crucial
– Lots of pent-up demand – record levels of cash on corporate balance sheets and in PE coffers
– More hostile bids – an indication of early stages of an M&A recovery
– Hot Industries – The sectors that will be ripe for activity include energy, technology, healthcare, and financial services