In 2015, more than 4.7 trillion dollars were invested in M&A globally, off the back of a strong stock market, improving global economy and cash-heavy balance sheets.
This year, pharmaceutical and technology industries are particularly ripe for activity, with businesses seeking to enter new markets and expand their customer base.
A new report entitled ‘US executives on M&A: full speed ahead in 2016’ from KPMG outlines trends, market expectations and key developments, polling over 550 CEOs, CFOs and managing directors planning M&A activity in 2016.
Nine out of 10 respondents in the survey said they would initiate an M&A deal in 2016, compared to 82 per cent in 2015, with the numbers of deals expected to double this year within the 4-6 deals range, to 34 per cent.
Similarly, more than double the number of firms as last year said they were intending to do seven to nine deals this year (compared to four per cent, last year).
That said, the numbers of deals expected to be done in the 1-3 deals range were down from 48 per cent in 2015, to 38 per cent this year.
In cash figures, around half of all deals were estimated to be valued at less than $250m, while 16 per cent were expected to come in at between $250m and $499m.
Mega deals - that is deals at more than $5bn, were estimated to be relatively uncommon, at just 2 per cent.
The industries expected to see the highest activity in the M&A space were headed by tech companies (at 70 per cent), pharma and biotech firms (at 60 per cent), healthcare providers (at 47 per cent), media and telecoms (42 per cent of respondents) and the energy sector (at 21 per cent).
One surprising admission was Financial services, which was generally not cited at all by respondents. Meanwhile, tellingly, two in three respondents said they did not think current market valuations were sustainable.
Major factors ranked by respondents for the forecasted boom in M&A deals this year, include:
51 per cent -- the cash reserves large corporates are sitting on, with reserves up 5.5 per cent on last year to $1.5tn;
37 per cent -- a desire to ‘enter into new lines of business’, ‘expand the customer base’ and 'expand geographic reach';
36 per cent -- low interest rates allowing access to finance at relatively low interest rates, incentivising buying;
34 per cent -- 'enhancing intellectual property or acquiring new technologies' alongside 'opportunistic reasons'.
Just under half of respondents believed the most important factor in deal success was a well-executed integration plan and a correct valuation or deal price, while less than a fifth said effective due diligence was the most important factor.
"Without due diligence, puchasers may be ill-prepared for what's in store when they attempt to integrate their target," the report warns. "Good due diligence reveal risks and allows buyers to understand and tackle such issues, pre-close."
