Dealmakers’ Execution Focus Increases in Competitive M&A Market
The fundamentals for strong M&A activity remain in place despite a slowdown in U.S. merger and acquisition (M&A) activity in the first half of 2013, according to PwC’s U.S. mid-year M&A outlook. Buyers remain extremely active in identifying, evaluating and competing to acquire assets in the market. The report noted that dealmakers are placing a premium on deal certainty, speed and agility to ensure successful deal outcomes that deliver long term value.
In the first half of 2013, there were a total of 4,587 total transactions, representing $528 billion in disclosed deal value, according to data compiled by Thomson Reuters and analyzed by PwC. Accelerated deal flow in the final months of 2012, a constrained supply of assets for sale, and a lack of confidence in executing on transactions contributed to a drop in deal activity in the second quarter of 2013. As PwC expected in its 2012 year-end M&A outlook, the middle market continued to prop up activity, accounting for 28% of value through June 30, 2013.
“Challenges in the M&A market are being driven by a lack of well-positioned assets for sale, not poor deal fundamentals,” said Martyn Curragh, PwC’s U.S. Deals leader. “A shortage of quality assets and a growing list of willing acquirers dictate a need for confidence and greater preparation to execute, from deal strategy through integration. Greater competition is driving valuations and deal timelines, leaving some would-be acquirers to reflect on missed opportunities, and others with buyers’ remorse for failure to capture deal value.”
Some of the highlights include:
As stakeholders place greater pressure and emphasis on companies to deliver deal value, companies are focusing on a more thoughtful and comprehensive integration process to quickly deliver on their investment rationale. According to PwC, early capture of deal synergies and value, increasing the knowledge around an asset, and flexible, rapid execution of the integration plan is critical to maximizing the return on an investment.
Divestitures remain a key driver of M&A activity, making up 31% of disclosed deal value in the first half of 2013. However, according to PwC, changes in buyer expectation, shareholder pressure and evolving industry and regulatory considerations are among the factors impacting the level of preparation needed on both the buy and sell side for deal certainty.
Private equity deals accounted for 20 percent of total deal value in the first half of 2013, representing a total of $103 billion in disclosed deal value.
Several sectors are ripe for deals, especially those where technology-driven convergence is a key driver and companies look to complete deals outside of their core competency. Notable sectors that continue to present opportunities include technology, health industries, financial services and retail & consumer.
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