Factors driving deals in 2014 and trends to look out for
As we have previously mentioned, many M&A professionals will look upon 2013 fondly as the year in which confidence returned to the market. Following a slow start to the year, multiples and volumes of deals increased significantly throughout H2 2013.
2014 is strongly expected to build on this with a number of factors expected to contribute to positive market conditions for owners considering selling their company.
With continued favourable credit markets and historically low interest rates, access to affordable finance to fund acquisitions has never been greater. Additionally, with low level activity throughout the recession by both corporate and financial acquirers, pent up demand looks set to drive competition for acquisitions potentially enhancing deal values and multiples significantly.
A stabilising economic climate and improving stock market performances in the US and Europe are breeding confidence in the market, something which has been lacking since the start of the recession. This renewed confidence coupled with increased access to capital promises to drive activity throughout 2014 as companies look to demonstrate sustained growth through M&A to validate share prices.
Two significant trends to look out for in the year ahead are increased cross-border activity and a shift in focus towards the middle market. Cross-border acquisitions are becoming increasingly popular as strong performing companies seek to capitalise on the positive market conditions by gaining a foothold in international markets.
There has also been an evident shift in focus from acquirers towards the lower middle market due primarily to the perceived difficulties in getting larger deals over the line. More and more acquirers are turning towards mid-market companies which offer potential synergies in order to bolt-on to larger operations.
Overall, it seems that there are several strong indications that 2014 will prove to be a strong year for M&A with high levels of activity from both corporate and financial acquirers. We are looking forward to what promises to be an exciting year in the industry.