31st July 2014
The value of global M&A soared to $1.7 trillion (£1 trillion) in the first half of 2014, it has been reported.
Globally, deal value rocketed by 50 per cent higher than 2013, according to data from EY.
It was also noted that deal volume is flat, as companies are opting for quality rather than quantity with their M&A activity.
Experts believe that current market conditions will see this trend continue over the next six to 12 months, making this a perfect opportunity for companies to agree on further deals.
High equity valuations, low interest rates and cheap debt will all foster this trend, along with strong cash piles.
Furthermore, positive investor sentiment is also creating a favourable environment for making deals. Organisations are increasingly seeking high-quality intellectual property and brands, and looking for growth in a low-growth environment.
EY’s global vice chair of transaction advisory services Pip McCrostie, commented: “These ideal conditions for transformative deals will not last forever. Interest rates will rise, equity values will move and the competition for high-quality assets will only become more intense with private equity actively increasingly in the mix.”
She added that leading companies will aim to carry out smart and strategic M&A before the current climate changes. This means there will be plenty more large, headline-grabbing acquisitions seen in the next few months, Ms McCrostie noted.
It was also pointed out that the outlook is to continue in the vein of value over volume, and quality over quantity.
Indeed, the first half of 2014 is the fourth highest ever when it comes to deal value. The first six months of 2007, 2006 and 2000 are the only halves that beat it.
Ms McCrostie noted that the beginning of this year had echoes of the M&A boom years when it comes to the size and value of deals. However, she also noted that there is no boom when it comes to the volume in activity - in fact, “far from it”.
She added that this low deal volume will continue for the rest of 2014 and beyond, as companies act selectively to secure large scale M&A.