KUHN CAPITAL Wednesday, March 21, 2018
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M&A: The Beat Goes On


KPMG released a survey today that had 82% of its respondents saying they were planning to acquire at least one business in 2015, a sentiment considerably stronger than in prior years. (The survey counted responses from 736 M&A professionals, PE firms and investment banks based in the US.)

KPMG notes that of course these intentions are dependent on “consumer confidence, favorable credit markets, and limited prospects for organic growth.” We’d also add that another positive factor for M&A velocity is the low return that corporations have been earning from the cash they’ve hoarded on their balance sheets since the 2007 meltdown. And in a related observation, interest rates on debt used to facilitate acquisitions is similarly low.

The respondents also believe that M&A activity will be dominated by smaller deals (“smaller” meaning less than $250M), a trend consistent with prior years. As for the industries seeing the most M&A, they expect healthcare/life sciences to lead the list followed by the perennial TMT (Technology/Media/Telecom).

This news comes on the heels of a Thomson Reuters and NVCA report that in 2014, US VC firms raised a total of nearly $30 billion, the most since 2007 and 69% more than 2013.

Obviously, over the last year all this interest has been driving up sellers’ multiples and if these trends hold for 2015, we’d expect to see higher multiples yet.

So the stage is supposedly set for a booming 2015 M&A market. But after one of the longest dry spells in the business’ history, we’ve learned to be cautious.

And to advise our sell-side clients to strike while the iron’s hot. These cycles happen regularly but unpredictably.

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