A seller’s market is set to continue in 2016 after a big year for M&A. In 2015, the total value of merger and acquisition (M&A) activity was a very buoyant $3.8trillion.
Grant Thornton’s survey of international business leaders in 36 countries found that 33% of respondents globally plan to make an acquisition over the next three years.
The main driver of companies’ future acquisitions was to enter new geographical markets and this explains the marked rise in the proportion of cross-border deals. Acquiring new talent or skills is also a main driver for businesses across all regions.
However, the regional picture is more varied due to the differing macroeconomic conditions.
ASEAN (Southeast Asian Nation) countries are showing acquisition appetite with many affluent investors looking for lucrative overseas deals. Singapore’s profile as an Asia Pacific (APAC) technology hub has also strengthened the region’s position in the global market.
But India and China, countries which have fuelled recent Asian M&A activity, both reported significantly lower propensity to acquire for future growth at 7% and 12% respectively. This signals some pessimism among businesses regarding future growth prospects and their ability to fund an acquisition. The slowdown in India and China is having an impact in other regions looking to sell companies to Indian and Chinese investors.
Meanwhile, western businesses thinking reflects the relative strength of western economies. Their recovery is bolstered by cheap sources of funding and strengthening national currencies.
In North America, while there was a 6% decrease in those considering an acquisition over the pat 12 months over 48% of companies remained confident that they would fuel growth through acquisition in 2016.
EU countries also appeared optimistic, with 36% of businesses considering an acquisition.
Latin America fell by 16%, but this was expected given that the region has been hit hard by low credit scores, currency devaluations and lack of financing.