Which Industries Do You Think Will Be the Most Active in M&A in 2015

SOURCE:  2015 M&A Outlook Survey Report from KPMG

Respondents predict that the most active industry will be healthcare related (84 percent). Other industries that were expected to dominate deal making include technology/media/telecom (62 percent), energy, oil & gas (36 percent), and consumer markets (34 percent).  NOTE:  Multiple responses were permitted.

Healthcare

As expected, an extremely large percentage of healthcare sector respondents (74 percent) said that the industry response to the Affordable Care Act would be the most significant driver for next year’s deal activity. Other important drivers were consolidation of core businesses/competition (45 percent) and the need for consumer growth (26 percent). The most active healthcare subsectors are anticipated to be hospitals (66 percent), managed care (37 percent), diagnostics (21 percent), and pharmaceuticals/biotechnology (21 percent). The most challenging issues for deal makers in this sector include regulatory/political issues, the ability to identify suitable targets, and valuation disparities between buyers and sellers (all at 42 percent).4

Technology

The key trends that will drive M&A in this sector include mobile technology (54 percent), cloud (48 percent), data analytics (47 percent), and security (38 percent). Beyond increasing revenues and cutting costs, the primary motivators for technology deals are access to intellectual property and/or talent (50 percent), bolt on acquisitions to enhance new products (42 percent), the acquisition of innovative technologies or products (41 percent), the desire to enter into markets (41 percent), and the desire to expand existing technology platforms (40 percent). The technology executives in the survey overwhelmingly said that the most common challenge to deal making in the year ahead was the valuation disparity between buyers and sellers (67 percent). They were also concerned with the identification of suitable targets (39 percent) and the buyer/target alignment on post-deal execution strategy (25 percent).

Energy

Energy respondents said that deals in their sector were being driven by the consolidation of core businesses and a response to competition (54 percent), the need for geographic growth (39 percent), and the need for new technologies and product and service growth (both 35 percent). The most common M&A challenges are anticipated to be uncertainty in the regulatory environment (48 percent), valuation disparities between buyers and sellers (46 percent), the ability to forecast future performance (35 percent), and volatile energy prices (33 percent).

Consumer Markets

Consumer markets respondents believe that the most important M&A trends are consolidation and the response to competition (41 percent), the need for product and service growth (39 percent), and the need for customer growth (36 percent). In terms of divestiture activity, the key trends are the opportunity to sell a non-core business (58 percent), the opportunity to monetize a successful business (43 percent), and the opportunity to sell an unprofitable business (30 percent). The biggest challenges are anticipated to be valuation disparities between buyers and sellers (52 percent), the identification of suitable targets (30 percent), and the ability to forecast future performance (27 percent).

 Contact Jeff Adam, PE, MCBC, FRC, CBB at Adam Noble Group, LLC
Phone: (817) 467-2161
https://adamnoble.com