After a year that's been awash with multi-billion dollar deals, the number and value of mergers and acquisitions looks set to return to pre-crisis levels over the coming 12 months, consulting firm EY said Monday.
In its biannual Global Capital confidence barometer, EY said global M&A is on course to return to 2006 levels in the next year thanks to improvements in market conditions. Companies started getting reluctant to do deals in 2007 when the credit crunch really started. The following year's global financial crisis and subsequent recession saw M&A activity come to a near standstill.
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However, the appetite for deal-making has picked up over the past couple of years as the world economy has recovered and stock markets, particularly in the U.S., have bounced back on growing confidence about the future. This year has seen a flurry of big announcements, particularly in the U.S., including AT&T's $48.5 billion takeover offer for DirecTV and Facebook's $19 billion bid for WhatsApp.
EY's survey found that 40 percent of companies anticipate pursuing acquisitions in the next 12 months. That's the highest level in three years.
It said the deals will not be confined to big names. In fact, some of the biggest activity will likely come from smaller firms seeking to strengthen their core businesses — it expects a big pick-up in deals valued at $250 million and under.
"Stable asset prices as well as increasing confidence in stability of the global economy are encouraging a more buoyant outlook for M&A," said Pip McCrostie, EY's global head of M&A. "Having experienced many years of volatility, this growing stability provides greater certainty in terms of strategic planning, although executives will continue to closely monitor unfolding geopolitical events."
EY said much of the M&A momentum will come from companies in the U.S., Britain, China, Japan, India and Australia. And the top five target countries are Brazil, China, India, Britain and the U.S. The sectors it found that could see big activity include automotive, technology, life sciences, telecommunications and consumer products
The survey is based on interviews with more than 1,600 senior executives in over 60 countries.