Looking ahead: All eyes on H2 and beyond
The US M&A market is in its strongest position in years. Deal values are up compared to 2014 and on track to match or surpass figures recorded at the peak of the market in 2007.
The outlook is positive. The US economy is steady, financing is cheap, balance sheets are strong and shareholder confidence is high. This is a good time to be doing deals.
As healthy as the market appears, however, there are some clouds on the horizon.
Valuations are high and positive deal figures have been underpinned by megadeals in a few sectors, rather than a broader recovery across the whole market. Dealmakers pursuing transactions should keep the following in mind:
Maintain discipline: Valuations are at new record highs, and there is a large amount of capital chasing a limited number of transactions. There are opportunities to do deals, but it is important to keep an eye on prices and avoid overpaying in a hot M&A market.
Be clear on strategy: Shareholders are supportive of companies doing deals, but in a market where valuations are high, investors want to see a clear rationale for doing a transaction and a detailed plan for what an acquirer is going to do with a target post-deal.
Monitor world events: To date, the US deal market has remained broadly insulated from issues abroad, such as the Chinese stock market crash and the risk of Greece leaving the EU. But events abroad have had some impact on US deal activity. European investment in US M&A, for example, is down on 2014 levels as Europeans step back from M&A due to uncertainty in domestic markets. Dealmakers should be aware of potential headwinds from outside the United States.
As healthy as the market appears, however, there are some clouds on the horizon.
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