Asia-Pacific is expected to see the most crossborder deals in a resurgent mid-market for mergers and acquisitions (M&A), according to a survey of corporate financiers conducted by accountancy and consultancy firm Nexia International. The survey also suggests that the manufacturing sector will witness the most deals during the next 12 months, followed by information and communications technology, and business services.
Nexia International's member firms pointed to growth in Asia-Pacific, particularly in south-east Asia and China, when asked to identify regions for M&A growth, with high volumes of activity also expected in western Europe, North America, and central and Eastern Europe. Mergers and trade sales, especially private equity-backed deals, are predicted to be the most utilised types of transaction, with leveraged management buy-outs or buy-ins expected to suffer due to the lack of debt finance.
Many of the firms surveyed reported that they had experienced a steady flow of mid-market M&A deals, with 35% of firms reporting that the volume of M&A deals on which they advised increased in the past year compared to the previous year. Another 41% maintained that the number had remained the same. Firms were confident about the volume of M&A deals that they expect to advise in the coming year. Despite the generally gloomy global economic outlook, 38% of firms reported that they expect the volume of deals to increase, and 52% expect the volume will remain unchanged during the next 12 months.
“The survey appears to confirm that there remains a steady trickle of businesses putting themselves up for sale as a result of the natural lifecycle of the family business,” said Charles Simpson, head of corporate finance at UK member firm Saffery Champness in an online statement. “This may be due to lack of cash, business owners wanting to retire or reaching a pivotal point in their lives, or changes in the family due to death, divorce or retirement. Succession planning remains a critical issue for many smaller privately owned businesses, which is the natural territory of many Nexia firms.”
Despite the cautious optimism prevailing in the market, Nexia said there was recognition that significant obstacles still remain. Difficulties in raising finance and a lack of market confidence were cited as key obstacles to M&A activity next year, followed by an inability to match valuation expectations.
“Mid-market M&A has been slow to recover from a series of setbacks following the fall-out from the financial crisis in 2009 and 2010,” said Mr Simpson. “Potential buyers have struggled to secure debt funding for deals, as banks remain reluctant to lend, instead focusing on existing customers and rebuilding their balance sheets.”