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What Does 2016 Have In Store For M&A?

2015 was a banner year for mergers and acquisitions, as seen in the chart below.

January 2016 - 2015 M&A Transactions 

And while January 2016 wasn’t great, with deal announcements down 7.1% compared to December 2015, according to a recent study by KPMG, U.S. deal makers believe the market will remain strong in 2016.   When it comes to why there is a strong appetite for doing deals, the answers haven’t changed much – buyers want to improve their competitive position, either by taking out a competitor, by expanding their product line or customer base, or enlarging their global footprint.  Additionally, there is pressure to satisfy shareholder requirements for growth, which are very hard to meet with organic growth.

Macroeconomic factors also impact the deal market, and while interest rates have gone up, they are still at historically low levels.  Companies (and private equity firms) have an abundance of cash on hand and need to put that money to work – especially because of today’s low interest-rate environment.

One fly in the ointment to be aware of – survey respondents believed 69% to 31%, that deal multiples were not sustainable in their industry, so look for falling valuations.

And finally, what sectors are expected to see the highest level of M&A activity?  

  • Technology
  • Pharmaceutical/Biotech
  • Media/Telecom
  • Healthcare Providers
  • Consumer Markets
  • Energy

If you’d like to understand how your industry sector and your business in particular may fare in today’s M&A environment, please contact me.