According to Deloitte’s latest M&A trends report, corporations and private equity (PE) firms expect to see an acceleration of M&A activity in 2018, both in volume and size of deals, and with particular interest in technology assets and international markets.
After surveying more than 1,000 executives at corporations and PE firms on their views and expectations for 2018, Deloitte provides some insightful findings.
Technology acquisitions now rank #1 as a strategic driver for M&A deals
20% of those surveyed cite the acquisition of technology assets as the principal reason behind deals, which surpasses deals to expand customer bases in existing markets. Further, if you combine deals made to advance digital strategy with acquisition of technology assets, then this would account for about a third of all deals being pursued.
Deals are working better
The majority of companies and PE firms appear to be getting better at making deals successful. To illustrate, only 1 in 10 respondents say that the majority of their M&A deals are not generating the anticipated returns on investment. One reason behind more successful deals could be that companies are now incorporating the use of non-spreadsheet-based M&A technology tools as part of the M&A process which increases efficiency, reduces costs and conflict, and improves post-deal integration. As such, 62% of those who have yet to tap into new M&A technologies state that they would like to do so moving forward.
US-based investors are looking abroad for deals
US-based companies and PE firms indicate that they will continue to vigorously engage in M&A activity abroad. For large corporations with revenues over $1 billion, almost half (49%) predict pursuing more than 40% of their deals in foreign markets.
At the top of the list, with 39% of respondents expressing M&A interest, is Canada, with Central America (32%) coming second. Other English-speaking countries such as the UK and Australia are tied for third at 29 percent. Deal activity in China (18%) and Japan (14%) are expected to drop significantly from a year ago. Lastly, European countries, as a whole, are less likely to draw deal activity in 2018.
With cash reserves up for the second year in a row for the majority of US-based corporate respondents, it is likely that they will look north of the border for a good portion of their M&A deals in the months to come.
The author would like to thank Peter Choi, Articling Student, for his assistance in preparing this legal update.
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