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M&A Trends 2012


With the Presidential election this week, market analysts seem to be optimistic that the Merger and Acquisition (M&A) market may be on the brink of a turnaround.

After a relatively slow year in the U.S.*, they say increasing corporate profits and cash-rich balance sheets leave the market poised for recovery. Depending on the source, there are between $2-$3 trillion dollars on the balance sheets of certain strategic players and most analysts agree that acquisitions are one of the most efficient ways to grow a business today.

So far investors have been wary, likely because the U.S. economy hasn’t recovered as thoroughly as most would have hoped. Once the election results are available, many are predicting that those who have waited to see which way the political chips will fall — thus impacting financial and regulatory legislation — will feel more confident, and will begin making decisions and moving forward.

In an M&A Trends article from Generational Equity, Carl Doerkson recently noted that equity firms are sitting on an estimated $400 billion or more of capital — much of which was raised in 2007 and 2008. This makes the next 12-18 months a critical time for the firms in question to invest these funds. It thus seems likely that the market will begin to see an increase in action in the relatively near future.

Ups and Downs
FactSet reports the industries that saw the biggest changes in M&A deal activity, comparing the three previous months (ending in October) over the same three months last year:

Industries that saw the biggest increase:

— Retail
— Wholesale & Distribution
— Communications
— Leisure & Entertainment
— Toys & Recreational Products

Industries that saw the biggest decrease:

— Brokerage, Investment & Mgmt. Consulting
— Banking & Finance
— Chemicals, Paints & Coatings
— Industrial & Farm Equipment & Machinery
— Drugs, Medical Supplies & Equipment

In addition to these trends from FactSet, The Allen & Overy M&A Index report (which tracks global trends) noted that the energy, life sciences and tech sectors in the U.S. had a quick start to the year and continued to prove themselves resilient.

Despite a general sense of optimism, it also mentioned a number of global factors (the pending presidential race among them) that are yet-to-be-determined and will likely have a major impact on end of year results — including the continuing Euro-crisis and changes taking place within the leadership of China’s Communist Party. With so many factors still in play, we will have to wait and see whether or not the market is truly on the verge of turning around.

*2012 volume and value totals still remain behind the pace set in 2011 as of FactSet’s October report