2013 M&A Activity: The Story So Far…

We are now almost two months into 2013 and we thought this would be a good time to analyze the trends we have seen thus far and make our predictions for the following 10 months. Well, to say we are pleased with what we have seen so far would be a gross understatement. Activity is soaring, well beyond what we could have expected, which is great news for sellers. In such an active market with heightened levels of demand for mid-market companies, owners generally receive high sale values due to the increased competition.

One trend which has become blatantly apparent since mid-2012 is that M&A is the preferred growth strategy for US & UK companies. Rather than opting for the lengthier and often more costly process of developing their own operations, companies are more and more commonly seeking to acquire other companies operations with the view of integrating them into their own thus saving costs of development of personnel, buildings and infrastructure. What we are hearing first hand is that companies would much rather acquire existing operations in order to save time in order to capitalize on current market conditions as quickly as possible.

Corporate confidence is improving and companies are being encouraged into the M&A market by ongoing access to capital, increasing private equity activity and relatively healthy debt margins. The heightened demand from corporate companies is also being accompanied by increased demand from within the private equity sector whom are currently sitting on large sums of cash held back over the last few years. It is estimated that roughly $1 trillion of dry powder is ready to be deployed meaning that 2013 could prove to be a record year with regards to private equity investment.

In February, Benchmark International delegates attended Real Deals European Private Equity event and the interest we saw in both our US and European company portfolio’s was simply staggering. The sense we got was that there is a real hunger to invest in high caliber acquisition opportunities and with demand from corporate companies and private equity typically driving each other, we predict that 2013 will be a record year for not only deal activity but also for deal values due to the effects of heightened competition and access to capital.

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