The recently published September 2015 M&A Predictor put out by
KPMG uses important indices and projections to predict the global
appetite for M&A in the upcoming year. Forward P/E ratios are
used by KPMG as a guide for overall market confidence and net debt
to EBITDA ratios are used to indicate the future acquisition
capability of companies. Using these metrics, analysts predicted
that the global appetite for M&A among the world's largest
companies would increase over the next twelve months, with forward
P/E ratios expected to increase by 11% between June 2015 and June
2016 and companies' capacity to transact increasing by 7%
during that same period.
M&A Predictions for North America
Although M&A appetite is increasing in North America, the
North American market is not predicated to be as hungry as the
global average, with forecasted growth in forward P/E ratios in the
North American region predicted to grow at 7% and with
companies' capacity to transact increasing by 5%.
Despite the positive trend in global M&A appetite, KPMG
reports that completed deal value and volume decreased in the first
half of 2015. Between January and June 2015, there was a 6% decline
in completed deal volumes while the volume of announced deals
remained relatively steady.
As stated in the M&A Predictor, the continuing impact of low
oil prices should not be overlooked. The global energy market has
been hit hard over the past year, as evidenced by the 19% fall in
market capitalizations in the world's largest energy
M&A Predictions for Canada
KPMG predicts that Canadian companies' eyes may be bigger
than their stomachs when it comes to their appetite for M&A
over the next year as forward P/E ratios for the largest Canadian
companies are expected to increase by 13% between June 2015 and
June 2016 but their capacity to transact is expected to decrease by
17% during that same period.
Norton Rose Fulbright Canada LLP
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