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Exit and Growth Strategies for Middle Market Businesses

Is 2014 the Year of the M&A Breakout?

By Catherine Patience | Mar 05, 2014

Upward chartAt year’s end, M&A professionals were surveyed by KPMG in the hopes of spotting trends that might hint at future results.  The 2014 M&A Outlook report suggests an increasingly robust M&A market with the center of global activity likely in our own backyard.  This year may just be the year of the M&A breakout.

KPMG’s survey is based on the responses of 1000 corporate M&A, private equity and investment banking professionals who were asked specific questions about the likelihood of entering into a deal in 2014 and how and why that might happen.  63 percent of respondents affirmed that they would be buyers in 2014.  Deal motivators include deploying cash, unique target opportunities and available credit at favorable terms, all to foster growth.  An expanding customer base and geographic reach as well as providing new, improved products were also part of the equation. 

At what price point will investments be made?  According to the survey, 77% of buyers will be spending less than $250 million on their acquisition, right in the heart of the middle market.  What will they buy?  The technology and healthcare sectors scored high marks in the survey this year and will likely see the lion’s share of deals.  Challenges that might hinder a transaction closing point at “quality”…quality of earnings, quality of assets and the difficulty of predicting future revenue streams.  Corporate buyers will have a slight advantage over financial buyers in the coming year, as they typically pay higher multiples and are currently flush with deployable cash.

Interestingly, KPMG’s 2011 survey asked the question “When do you think the economy will recover?” and the answers are insightful.  32% of respondents answered at the end of 2013 and 33% answered at the end of 2014 or beyond.

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