Looking ahead: All eyes on 2015
Looking ahead US M&A activity should continue thriving into 2015. However, despite an upbeat outlook, dealmakers cannot afford complacency. The beginning of 2015 has seen stock market volatility and a continued slide in oil prices—at the time of writing, Brent Crude Oil prices were at a six-year low and have seen a drop of 60 percent since the middle of last year. One major theme of 2014 was the discrepancy between the increases in value and volume. “We note that while aggregate deal value is up substantially, which is creating a lot of the excitement around the M&A market, the fact is that aggregate deal volume has not increased as much. A fall in the number of megadeals in 2015 could affect the momentum built up through the last year,” says White & Case partner Morton Pierce. As dealmakers move into 2015, they would, therefore, do well to remember the following lessons from the year past: Watch the regulators Antitrust scrutiny has impacted a number of deals and the US Treasury has tightened the rules around tax inversions, a development that prompted AbbVie to withdraw its bid for Shire Pharmaceuticals. Dealmakers should be following these developments closely. Stick to strategy Shareholders have, for the most part, rewarded boards that have pursued transformative deals. This should not, however, be read as a green light to pour cash that has been sitting on balance sheets into a slew of opportunistic deals. Investors will back transactions, but only if they are underpinned by solid deal rationales. Diversify your acquisition capital When prices are high, it is worth mitigating risk by using a variety of acquisition capital to fund a transaction. Companies may want to pay with stock to share some of the risk with their targets. And even cash rich corporates may want to use debt to finance at least some portion of their deals, given that debt is widely available and attractively priced. Do your diligence The competition for prized assets is likely to be just as fierce in 2015 as it was in 2014. However, the desire to prevail over rivals and get the deal done as quickly as possible should not preclude bidders from doing thorough due diligence on their targets. While there has been something of a slowdown in the first weeks of 2015, we believe we believe the prospects for dealmaking in 2015 remain positive. However, the real acid test of the US M&A recovery will be whether there is a deepening of the market beyond the megadeals that dominated the headlines in 2014. “We continue to have a strong US economy and a deal market that is attractive to both domestic acquirers and foreign acquirers. That bodes well for a strong 2015,” says White & Case partner Daniel Dufner. “There is an entire well of untapped M&A activity. We hope that in 2015, we will not only see megadeals, but also see activity floating down-market.”
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