Catalysts for Global M&A Activity
In 2017, steady economic growth in North America combined with the need for innovation and technology will be the two primary drivers behind a predicted increase in M&A transactions. This will be a continuation of recent M&A activity involving major players targeting technology companies in order to synchronize strategic technologies into their service or product offerings allowing them to adapt to the rapidly changing customer behavior towards technological software including E-Commerce, BlockChain, and Cloud-Servicing software.
Global Outlook
The 2016 year M&A activity stagnated due to three main factors: Brexit, the historical US Presidential election, and uncertainty regarding U.S. interest rates in the near term. 96% of respondents, according to Mergermarket data, believe North America will be one of the top three countries to see the biggest increase in M&A activity in 2017 (followed by Europe and China). Canada is now ranked 4th, ahead of France and behind the United States, China and Germany, as a global destination for M&A activity in the upcoming 2017 year. This is the first time Canada has ranked top 5 since 2013 when oil prices were at its peak.
One of the reasons for the potential increase in Global M&A is that many North American acquirers will be looking at foreign targets for more reasonable and feasible valuations. Deal-making will increase since domestic businesses around the world are facing stagnant growth and have minimal ability to find success from organic strategies. This in turn will lead businesses to focus on targets in regions that have high growth potential (emphasis on rising innovative technologies).
Legacy Sector Outlook
The legacy sectors in 2017 will be Financial Services and Asset Managers, Industrial, Chemicals, Energy, and Mining sectors. The industrial and chemicals sectors have already had a surge of deals scheduled for completion in 2017. Stagnant overall growth within the industrial and chemicals sectors will be the main reason for businesses in this sector to consider potential M&A deals to drive more efficiency and growth for their business.
Emerging Sector Outlook
The industries on the emerging sector outlook will focus on Financial Technology (FinTech), Internet of Things (IoT), and E-Commerce as the top three targets for dealmakers. Businesses will be dealing with increased pressure from shareholders to remain relevant in the changing digital landscape. Consumers are shifting away from the traditional services offered by financial advisors/planners and are transitioning towards Robo-Advising and FinTech companies that offer simple and easy solutions for wealth management and planning. Financial Technology companies are prime targets for deal makers as many corporations are focusing on providing better customer experiences while diversifying their services and cost reduction. Furthermore, 91% of businesses are utilizing big data and analytics as part of their deal process. Therefore, significant technological advancements will be the main driver in increasing deal-making in 2017.
What does this mean for sellers?
With so many prospective buyers, sellers should be optimistic as there is a strong market for business acquisitions. Sellers with established businesses looking for a quick exit strategy for retirement or for other ventures might find it easier to sell their businesses in comparison to what was possible a few years ago.
What does this mean for buyers?
There are more strategic opportunities in the market that entice buyers. Many corporations are looking for more opportunities to expand their geographic reach and customer base or to enter new lines of business. In some industries, it might be more economical to purchase intellectual property than it is to develop it in-house which may be another reason why certain Buyers are drawn to purchase companies.
What can we do for you?
As reported by EY, The largest planned deal size in the next 12 months would be 0-250 mil at 42% and 251m-1bil at 53% of the total market volume. Many economists believe that the M&A environment in 2017 will have a rise in the value of mergers and acquisition transactions and consequently, the risks associated with these deals are expected to increase. In order to ensure a deal is successful, it is crucial for participants to have a well-executed integration process, accurate valuation, and effective due diligence.
This is Beacon Corporation’s area of expertise. We are Toronto’s premium business brokerage firm, specializing in transactions of companies with revenues of $1 to $50 million. We are a one-stop shop and provide our clients with all the services they need when selling their business from valuation, to confidential marketing, negotiations, and closing procedures.
If you are considering selling a business or are interested in one of our current businesses for sale, get in touch with one of our brokers.
For additional information, please contact:
Beacon Brokerage: 416-228-1200, contact@beaconbrokerage.ca