Merger and acquisition activity is expected to increase in 2013, according to a survey conducted by KPMG and the research practice unit of SourceMedia, the publisher of Mergers & Acquisitions. The survey of more than 300 M&A professionals in the U.S. found that 76% of respondents anticipate that their company will make at least one acquisition in 2013.
According to 60% of the M&A professionals, companies’ large cash reserves will drive deal activity and 40% acknowledged favorable credit terms as a supporting factor. Opportunities in emerging markets will also be a catalyst for deals, said 26% of respondents. Primary reasons for making acquisitions varied among the survey population, with 20% of respondents reporting that expanding geographic reach would be their primary motivator, while 19% cited a quest for profitable operations, followed by 17% who anticipated making acquisitions in order to enter a new line of business.
“Although there is still plenty of uncertainty in the markets, we will likely see M&A activity pick up as the year progresses,” said Dan Tiemann, Americas lead for KPMG’s Transactions & Restructuring practice. “Financing conditions continue to be positive. Many companies are holding large amounts of cash and the U.S. debt markets remain open.” Tiemann also added, “As part of efforts to pursue their growth agendas, companies will look to execute transactions that align with their business priorities and strategic road map.”
Deal size is expected to remain on the smaller side, similar to 2012. Seventy-nine percent of the survey population expects their deals to be valued at $250 million or less, and 12% foresee deals valued between $250 million and $500 million. Only 2% expect to engage in deals valued between $1 billion and $5 billion.
The survey results are consistent with marketplace trends, said Phil Isom, U.S. leader for KPMG’s Corporate Finance and Restructuring practice. “Middle-market deals continue to dominate. They are easier to finance and to justify to shareholders in what is still a somewhat uncertain economy,” he said.
The survey also examined respondents’ projections for M&A among specific industries, which indicate possible increased activity in the technology sector (39%), healthcare and pharmaceuticals sector (35%) and energy sector (31%). When asked which region would experience the most deals in 2013, 73% of respondents cited North America. Western Europe and China garnered 28% and 27% of responses, respectively.