Home >> Resources >> Blogs >> Market Insights >> KPMG Study Suggests M&A Market Set for Rebound
04 Mar |
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 A recent study by KPMG supports MidCap Advisors' belief that there will be a significant increase in both M&A appetite and capacity during 2010. According to KPMG, the increase will come from strategic buyers instead of private equity. The KPMG study attempts to identify changes over time that could affect the appetite and capacity for deals. The study indicates that most of the activity in 2010 will come from corporate buyers making strategic acquisitions. While the results suggest there will be some resurgence in private equity deals, financial buyers will continue to be constrained by a shortage of debt which puts them at a comparative disadvantage to strategic buyers. Two factors support the expected improvement in strategic M&A activity; improved forward looking price/earnings ratios and next year's forecast net debt to EBITDA ratios. Following the extraordinary volatility of the last year, forward price to earnings ratios are now seven percent higher (14.0x for 2010 versus 13.1x for 2009) while net debt to EBITDA ratios are expected to decline by 18 percent from 1.5x to 1.2x. An increase in forward PE ratios means an increased deal-making appetite, while declining net debt to EBITDA ratios means improved deal-making capacity. As a result, the KPMG study suggests a slow but steady improvement in M&A activity over the next 12 months even though credit markets remain tight. This study suggests that the M&A market has been reset for growth. Many indicators suggest that the market has been re-calibrated and that business owners considering either acquisitions or sales should now be able to look forward to a steady reawakening of the M&A market during 2010. |
