BY Mark Williams
The world’s largest companies are expected to maintain a healthy appetite for M&A over the next six months, according to KPMG’s M&A Predictor, released in August 2014.
Price-to-earnings ratios have climbed 16 percent during the last year. At the same time, corporates are continuing to pay down debt and have an increasing amount of cash with which to fund deals. Although these factors create a fertile environment for dealmaking, appetite and increasing capacity are yet to result in the expected level of deal completions, says KPMG.
Despite the increase in announced deals through Q1 2014, which signals the return of a strong appetite for M&A, deal completions remains static, and the value of these deals continues to fall. Part of this is due to political interference in the deal market, evidenced by the proposed Pfizer deal in the UK and the GE deal in France.
That said, KPMG believes the overall the picture is a positive one. “Appetite remains strong, capacity is going up and we are starting to see an increasing number of deals being announced,” says Tom Franks, KPMG’s Global Head of Corporate Finance. “There is a danger, though, that domestic protectionism, certainly in markets like the UK, France and Canada, could damage the recovery. Furthermore, whilst increasing political instability in North America, the Middle East and Ukraine has not yet appeared to impact sentiment it remains a very real threat,” he added.
Report: KPMG M&A Predictor August 2014