M&A Reemerges as a Leading Growth Strategy Among U.S. Organizations, KPMG Survey

NEW YORK, Dec. 2, 2014 /PRNewswire/ -- According to a survey by KPMG LLP, the U.S. audit, tax and advisory firm, merger and acquisition (M&A) activity is reemerging as a leading growth strategy among U.S. organizations for 2015.  Of the 738 M&A professionals, investors and advisors who participated in the survey, 82 percent anticipate that their U.S. companies or clients will initiate at least one acquisition in 2015, compared with 63 percent in 2014.

"Economic fundamentals that drive M&A are back at pre-crisis levels, with corporations holding large cash reserves, interest rates remaining historically low, consumer confidence improving and the U.S. dollar becoming stronger," said Dan Tiemann, KPMG's national leader for Transactions & Restructuring. "Organic growth often offers limited growth prospects, so buyers are paying a premium for targets that will allow them to realize long-term strategic goals and gain an advantage over the competition."

Valuations are also expected to increase year over year, with fewer M&A professionals expecting to pursue deals under $250 million, and more respondents expecting to do deals valued upwards of $250 million, $500 million and $1 billion.

Technology Sector and U.S. Market Expected to Lead

Forty-seven percent of respondents expect the most transaction activity in 2015 to occur in the Technology sector, followed by the Pharmaceutical & Biotechnology (33 percent), Financial Services (30 percent) and Oil & Gas (27 percent) sectors.

A robust 73 percent expect the U.S. to be the most active market for transaction activity in 2015, up from 56 percent in 2014. This contrasts with drops in other regions, including in Western Europe, China and Brazil.

"Many U.S. industries like health care, banking and energy are growing in complexity due to disruptive technologies and changing regulations, which drives a high level of transformation," according to Tiemann. "Although some regions continue to have slow growth environments, the U.S. capital markets have rebounded since the financial crisis, so we're seeing acquirers focus on U.S.-based transactions."

Large Cash Reserves a Top Driver of Deal Activity

Large cash reserves will be the top driver of deal activity in 2015, according to 40 percent of the M&A professionals, followed by strategic fit at 21 percent.  However, 27 percent believe deal activity could be inhibited by a lack of suitable targets.

Thirty-five percent indicated they review their company's portfolio of assets on a monthly basis for potential acquisition candidates, followed by 27 percent who review their portfolio quarterly. New product development (38 percent) and geographic expansion (28 percent) will drive 2015 revenue growth for those not planning to pursue transactions. Sale to a strategic buyer is expected to be the top exit strategy in 2015, according to 64 percent.

"Finding assets that will generate returns to satisfy investors has proven difficult for corporations and private equity firms alike. Acquirers are taking thoughtful, strategic approaches and, in some cases, this means walking away from overpriced deals," said Tiemann. 

Realizing value in pre- and post-deal phases

Fifty percent of respondents indicated that assessment or volatility of future revenue streams is the most challenging due diligence issue, and that the greatest challenge during the integration process is related to culture and human resources (53 percent). Forty-three percent of the M&A professionals cited a well-executed integration plan as the most important factor for deal success.

About the 2015 M&A Outlook Survey

In collaboration with the Research practice unit of SourceMedia, the publisher of Mergers & Acquisitions, KPMG LLP surveyed 738 M&A professionals in September 2014. A webcast will be held on January 14, 2015, where KPMG M&A leaders will review and discuss the data.

About KPMG LLP

KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative ("KPMG International"). KPMG International's member firms have 155,000 professionals, including more than 8,600 partners, in 155 countries.

Contact: Jamie Bredehoft 
KPMG LLP 
201-505-6074 
[email protected]

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SOURCE KPMG LLP

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