12 Nov 2019 – M&A AT A GLANCE
The M&A market continues to be strong for sellers bolstered by limited availability of investment options, increasing cash reserves of investors, and stalled organic growth opportunities. This continues to be good news for sellers.
STRATEGIC BUYER FOCUS
Strategic buyers are looking for growth. Earnings per share (EPS) growth has slowed among a number public companies, increasing the interest in outside growth. Thus, strategic buyers will rely on M&A to fuel incremental growth in order to support elevated valuation levels. And with the cash available to acquire, many companies are pursuing this route of inorganic growth.
FINANCIAL BUYER FOCUS
Private equity buyers are aggressively seeking deals as well. More than 900 private equity funds around the world secured over $450 billion in commitments in 2018 alone. During the first half of 2019, the 10 largest funds raised short of $80 billion, about 25 percent more than the capital amassed by the 10 largest funds during the first half of 2018. Today, there’s more than $1 trillion of private equity capital seeking investments globally, providing continued upward pressure on valuations while fueling economic growth.
GEOPOLITICAL AND ECONOMIC “NOISE”
Today’s geopolitical and global trade concerns are stealing headlines and affecting deals. Tariffs have created uncertainty as well for companies with international footprints, both from a sourcing and sales perspective. The impacts on cross-border deal-making has been limited however, especially for consumer products businesses.
While there has been some reduction in the number of deals going to market, these factors are not affecting valuation multiples in growth-oriented end markets. Most buyers are looking long-term and seeing good growth potential over the next decade.The best leaders are managing their businesses for the long term. These geopolitical issues are often relatively short-term blips that don’t change a business’s long-term strategy.
CONCLUSION
Buyers continue to line up for top-quality assets, just as they were a year ago. High-quality companies that check all the boxes have gotten even more aggressive and are moving faster. There is also a smaller group of true A+ companies in the market, with more buyers competing for these fewer deals.
The potential returns of direct investment in great private companies continue to attract new buyers. Buyers are doing the math and still buying good businesses that perform well across different economic cycles.
Source: Thomson Financial
Source: Thomson Financial