A recent PwC survey shows that, even after a historic year in 2015 regarding M&A activity, the ever-increasing appetite for M&A will continue its upward trend in 2016.
In 2015, 65% of all deals met PwC's standard for "mega deals", which PwC defines as transactions valued at over $5 billion USD. This year, the strategy to optimize results and performance through "active portfolio management" will continue to drive strategic partnerships and acquisitions in the US and abroad.
According to the survey, 59% of 97 US-based CEOs (of companies with annual revenue from $1-10 billion USD) said that they were planning to enter into new strategic alliances or joint ventures in 2016. Over 45% said they were planning to initiate a domestic M&A transaction and approximately one-third said they were planning to initiate a cross-border M&A transaction in 2016, which means that Canadian companies should be on the lookout. Though these numbers are not as high as those of 2015, PwC still expects the mega deal activity to continue throughout this year.
Turning abroad, about 50% of the 1,409 CEOs globally surveyed said that they were planning to enter into new strategic alliances or joint ventures this year. Over 25% said they were planning to initiate a domestic M&A transaction and slightly less than 25% said they were planning to initiate a cross-border M&A transaction.
What makes for such a hot deal market in 2016? At least in the US, PwC claims that companies will continue to pursue deals to position themselves for growth in the fast-moving technology sector and unlock value in stagnant mature sectors such as industry products. In the face of changing external conditions, there seems to be no other way for companies to thrive.
If the first half of 2016 is any indication of M&A activity in Canada for the rest of 2016, the second half of 2016 promises to bring exciting times for Canadian companies. Hang onto your hats!
The author wishes to thank Peter Choi, summer student, for his assistance in preparing this legal update.
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