2015 M&A Outlook Survey

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The boom is back: M&A reemerges as leading growth strategy

U.S. deal-makers are encouraged by low interest rates, record stock prices, improving employment numbers and an abundance of cash.

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A forward-looking view of M&A trends

We surveyed over 735 M&A professionals, including those at U.S. corporations, PE funds and investment banks. We found an abundance of optimism. Watch KPMG’s M&A thought leaders discuss market trends and hear their impressions of today’s deal environment.

U.S. ranked the most popular deal destination

Which countries and regions are most attractive for M&A investors? A whopping 73 percent chose the Unites States, probably influenced by its relatively healthy economy and receptive credit markets. Survey respondents were also attracted to Western Europe (14%), North America (13%), and China (12%).

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North
America (not
including the U.S.)

13%

2015

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United States

73%

2015

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South
America
(not including Brazil)

6%

2015

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Brazil

5%

2015

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Western
Europe

14%

2015

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Eastern
Europe (not
including Russia)

3%

2015

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Middle East/
Africa

3%

2015

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Asia
(not including
China or India)

8%

2015

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India

4%

2015

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Russia

1%

2015

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Other

3%

2015

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China

12%

2015

(Note: Figures total more than 100%.)

Sectors expected to have the most deal activity are those characterized by transformation

Healthcare / Pharmaceuticals / Life Sciences

Healthcare / Pharmaceuticals / Life Sciences

84%

The Affordable Care Act is expected to be the most significant driver for 2015 deal activity

Technology / Media / Telecom

Technology / Media / Telecom

62%

Primary motivators for technology deals are access to intellectual property, talent and bolt on acquisitions

Energy

Energy

36%

Deals will be driven by consolidation of core businesses, competition and geographic growth

Consumer Markets

Consumer Markets

34%

M&A trends are motivated by industry consolidation and the response to competition

Acquisition momentum is expected to build in 2015

This year, M&A in the U.S. has finally reached pre-crisis levels. Respondents expect to be even more active in 2015. Almost 80% said their companies or funds made at least one acquisition in 2014; an impressive 82% expect to make at least on acquisition in 2015.

Strategic opportunities motivate buyers

What is motivating this activity? The largest percentage of respondents (21%) said their acquisitions were opportunistic and they planned to act because the right target became available. Other reasons include expanding their geographic reach (19%), expanding their customer base (16%), and entering new lines of business (15%).

What is the primary reason for the acquisitions you intend to initiate in 2015?

Opportunistic (i.e., target becomes available)

21%

Expand geographic reach

19%

Expand customer base

16%

Enter into new lines of business

15%

Financial buyer looking for profitable operations and/or gain on exit

11%

Enhance intellectual property

5%

Other

5%

Defend against competition

5%

Invest in another function in the supply chain

4%

Cash will drive deals

Several macro-economic factors should facilitate M&A activity in the coming year. The largest percentage of respondents (40 percent) cited large cash reserves and/or commitments. Deal activity should also be driven by opportunities in emerging markets (19 percent), the availability of credit on favorable terms (16 percent), improved consumer confidence and improving equity markets (both 8 percent).

Which factor do you think will most drive deal activity in 2015?

Large cash reserves/ commitments
40%
Corporations and PE funds are sitting on record amounts of cash and uninvested capital and need to make that money work, especially in today’s low interest rate environment.
Opportunities in emerging markets
19%
Although growth has been slowing in certain emerging markets, most notably China, those geographies continue to provide attractive investment opportunities.
Availability of credit on favorable terms
16%
Low interest rates and favorable credit markets have made financing deals currently much easier than just one or two years ago.
Improved consumer confidence
13%
According to the Conference Board, consumer confidence rebounded in October and indicates that consumers are feeling more optimistic about the current job market and business conditions.
Improving equity markets
8%
The Dow and S&P 500 both hit record highs in November.
Other
5%
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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

42%

Correct valuation/deal price

26%

Effective due diligence

18%

Positive economic conditions

11%

Other

2%

Integration and due diligence require attention

As deal values rise, risks become more significant. Acquirers need to focus their integration plans on cultural and HR issues, as well as products and services integration and rationalization.

Accuracy of revenue projections top due diligence concerns

Other challenges on the minds of our respondents are those more easy to control through the right due diligence efforts. Of the greatest interest to them are such critical due diligence issues as the volatility of future revenue streams (34%), the quality of a target’s earnings (19%) and assets (11%), cost synergy analysis (9%) and cultural issues (9%).

Tax issues are also of significant concern, whether considered at the outset of a deal (a large majority of respondents, 70%) or after key deal terms and structures are decided (26%).

How influential is the Federal Reserve’s monetary policy in your decision to raise or refinance capital?

For more insights on the M&A market from our respondents, read the 2015 M&A Outlook Survey Report publication.

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Join our webcast:

2015 M&A Outlook: A look at the robust market ahead

Wednesday, January 14, 2015 | 2:00 p.m.–3:00 p.m. (ET)

1 CPE Credit

Event Overview: Join KPMG’s M&A thought leaders for an exclusive look at trends and insights into the exciting 2015 deal market.

+ Register Now

Contact us

KPMG’s Corporate Finance, Transactions & Restructuring, 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.

Mergers & Acquisitions Magazine is the premier destination for breaking news, in-depth commentary and analysis about the burgeoning middle market. It is published in partnership with the Association for Corporate Growth® (ACG), a global organization comprised of thousands of private equity firms, corporate officials and intermediaries.

To learn more about how KPMG can assist with your specific needs, call:

Phil Cioffi National Leader,
M&A Tax
212-872-2160 pcioffi@kpmg.com
Philip Isom Global Head of M&A
312-665-1911 pisom@kpmg.com
Marc Moyers National Sector Leader,
Private Equity
804-782-4260 mbmoyers@kpmg.com
Daniel Tiemann National Leader,
Transactions &
Restructuring
312-665-3599 dantiemann@kpmg.com

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