Looking ahead to the 2012 merger-and-acquisition environment, PricewaterhouseCoopers sees pent-up U.S. demand for deals being unleashed — if the lending environment eases and access to capital improves.
In its latest M&A report on the “Hunt for Growth,” as PwC calls it, the consultancy predicted that acquisition activity would remain steady if “current macroeconomic conditions and limited financing persist into the new year.” It that is the case, it said, some dealmakers with capital would be staying on the sidelines. But that “wait and see” mode would give way to an uptick if conditions improved.
Volatile equity markets slowed mounting U.S. deal activity in the third and fourth quarters, following growing deal momentum in the first two quarters of 2011. In light of concerns over European debt and a pullback in financing, U.S. merger and acquisition activity in the second half of 2011 was driven by well-prepared dealmakers focused on executing acquisitive growth strategies and availability of businesses with strong fundamentals– a key trend expected to continue into 2012, according to PwC’s Year-End U.S. M&A Outlook.
“Despite lingering concerns for the global economy and financing obstacles, there continues to be a steady pulse of deal activity in the U.S. through the second half of the year from both corporate and financial investors,” Martyn Curragh, U.S. transaction services leader for PwC, said in a statement accompanying the report. “The ‘hunt for growth’ remains a top priority for corporates of all sizes, while private equity also continues to put capital to work at higher levels than last year. Looking ahead to 2012, there will be a greater focus on being able to navigate global market conditions and having more certainty around final deal outcomes.”
He added, “We’re also continuing to see buyers look towards the emerging markets, such as Brazil and China where local economies are in an upward cycle.”
In PwC’s appraisal, sellers now are looking for both speed and certainty in a deal, and also pursuing various alternative options and scenarios as they proceed as a way of maximizing the asset’s value.
That’s because, with “sellers in the driver’s seat, buyers must remain poised and ready when deal negotiations continue for a prolonged timeframe,” according to PwC.
Said Curragh, “Savvy buyers and sellers that thoroughly prepare for and understand every option will be the most successful in executing on growth objectives and deal strategies.”