Mergers and Acquisitions set to rise as third of businesses look to buy
- 09 April, 2015 05:48
Mergers and Acquisitions activity is set to record strong growth in 2015 and beyond, with 33 percent of businesses planning to grow through M&A over the next three years, a steady rise from 31 percent in 2013 and 28 percent in 2012.
Latest research from the Grant Thornton International Business Report (IBR), a global survey of 5,400+ business leaders in 35 economies, finds strong M&A activity across the world, with 43 percent of business leaders admitting to have “seriously considered” at least one acquisition opportunity over the past 12 months, up from 39 percent in the previous period.
“The results confirm that the M&A market has rediscovered its vigour, with the most dynamic businesses embracing acquisitions as a vital growth tool,” says Mike Hughes, global service line leader of M&A, Grant Thornton.
“Despite some familiar challenges and uncertainties, underlying growth is relatively strong in many developed economies, while other key metrics such as interest rates, employment and availability of funding are also positive.”
Regionally speaking, North American business leaders remain the most bullish (45 percent), ahead of Latin America (38 percent), Europe (32 percent) and Asia Pacific (22 percent).
Closer to home however, New Zealand backup specialists Plan B are recent examples of this trend, having acquired local data communications business Turnstone last week.
"There are considerable regional variations,” Hughes adds. “Ranging from a bullish North American outlook to a fragile eurozone and less activity in some of the previous powerhouses such as China - indicating that transaction activity will be far from uniform across the globe."
Business leaders are increasingly looking to banks to fund growth according to the IBR.
Retained earnings (62 percent) are still expected to be the largest source of finance, but the proportion of businesses planning to use bank debt to finance deals has risen to 57 percent, up from 48 percent this time last year.
Meanwhile confidence is also rising on the vendor side: 14 percent of business leaders plan to sell up over the next three years, up from 11 percent in 2013 and 8 percent in 2012.
“Historically the transaction market has been relatively cyclical but according to our research we may well now be at a point where the objectives and valuations of buyers and sellers are broadly aligned,” Hughes adds.
“The supply of available targets is clearly key for a successful M&A market but in recent years vendor confidence in achieving a successful exit has been low, driven by modest financial performance, valuation concerns and perceived transaction risks, such as availability of buyer funding.
"We have also seen a significant shift in the funding landscape with traditional bank funding more accessible and the rise of the alternative lending sector."