What’s Next for the M&A Market?
Last year was a big year for mergers and acquisitions (M&A), can 2016 live up to it again? Possibly! In 2015, M&A’s accounted for $3.8 trillion alone mainly due to big business deals. And, it appears as though the market is set up similarly to 2015, which could lead to another big year.
So, what makes the market ripe for a big M&A year? Here are three observations from 2015 as noted in the article, “Mergermania: Why Mergers Could Make for Big Winners in 2016,” by U.S. News.
• M&A deals have been on the up and up for several years
• Big deals pave the way for other big deals
• Revenue pressure
The big M&A deals from 2015 include:
• NXP Semiconductors and Freescale Semiconductor
• Comcast Corp. and Time Warner
• Pfizer - Hospira and Allergan
As stated in the above article, “Rob Berick, senior vice president and managing director of Falls Communications in Cleveland, also sees mergers growing in popularity. ‘Mergers are increasingly global in nature for tax and market share/scalability reasons.’” If financial markets tighten their reigns because of a slower economy, companies start to look into mergers. Overall, the thoughts for 2016 are as follows:
- Steve Sapletal, director in the Minneapolis office of West Monroe Partners says, “Mergers will continue to be strong, but I would expect longer diligence time frames and much more attention on customer and employee diligence."
- Philip Rooke, CEO of the e-commerce platform, Spreadshirt, says, "In most markets there are too many players and consolidation will take place. We'll see many mergers and acquisitions as well as big strategic partnerships in 2016 and 2017.
Then, if we look at the Forbes article, “Four Reasons 2016 Will Be a Strong year for M&A,” we see similar predictions. Here are the four factors that set 2016 up to be another great M&A year:
1. Confidence – Company decision makers are getting braver after watching the market reward those who acquired other companies. Plus, if the economy grows, as it’s predicted, that just gives CEO’s another incentive to test the M&A waters.
2. Decent financing – Interest rates increased, but not enough to scare off companies seeking big financial moves like M&A deals. As a matter of fact, the article states, “Interestingly, the rising interest rates may actually encourage deal-making this year, as they have the potential to limit growth and inflation, and drive companies to continue looking to M&A for growth.”
3. Pressure – The economy may be growing, but it’s slow, so M&A’s might be the key to helping companies grow faster.
4. Competition – Companies have to keep up with each other, especially within the same industry. If M&A is the way to grow, without relying on a slow economy, than competitors have to look to the same strategy to survive. As stated in the above article, “The nation’s largest companies are looking to M&A as a strategy to grow market share, boost revenues and reduce costs.”
If M&A is equally as productive in 2016 as it was in 2015, then the market will continue to thrive. Companies are in search of ways to grow when they can’t rely on the economy, and M&A might be the answer. For more information, or to learn about benefits and payroll, please contact BenefitMall to talk to a representative.
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