According to Investopedia, mergers and acquisitions, also known as simply M&A, is defined as “a general term used to refer to the consolidation of companies.” The definition also explains that “a merger is a combination of two companies to form a new company, while an acquisitions is the purchase of one company by another in which no new company is formed.” M&As are very pertinent to the world of business, and now is the time of year when many business insiders are weighing in on the M&A trends we can expect to see in the coming year.
Financial advisory firms like Lazard benefitted greatly from the increased M&A activity that took place in 2014. According to Nasdaq, “Globally, the value of 2014 mergers and acquisitions hit $2.66 trillion through the end of the third quarter, according to data from Thompson Reuters,” which was reportedly a 60% increase from 2013. So what M&A trends can we expect to see in 2015? Here are five predictions for the 2015 M&A market:
- M&A activity will experience sustained momentum. Because many banks, businesses, and financial advisory firms experienced significant monetary growth in the third quarter, many predict that M&A momentum will continue on in 2015. Recent data concludes that “M&A markets have been steadily improving for some time,” explains InformationWeek’s Matthew Porzio.
- There will be a renewed focus on larger deals. “The market also saw its share of portfolio shaping via divestitures as firms (especially larger ones) continue to focus on their score,” explain Bob Kipps and Marc Marlin of Washington Technology. Businesses going for larger deals to help shape their portfolios will be an ongoing trend in 2015.
- Divestitures will be a trend in 2015. Divestitures refer to the partial or full disposal of a business unit through sale, exchange, closure, or bankruptcy. Kipps and Marlin predict that divestitures will be a large trend in M&A markets in the year ahead.
- Big buyers will be very selective about which deals they chase. “The larger, typically more aggressive acquirers […] will stay focused on the larger ($100 million-plus in revenue), prime, full and open firms with critical mass in the priority areas of health, cyber, intel, big data, and cloud,” explain Kipps and Marlin.
- There will be an increase in “alternative transactions.” Although 2015 is expected to be a good year for M&A markets, some business insiders expect the very nature of M&A deals to change. Kipps and Marlin predict that “The traditional model of M&A being the end, for many will be replaced by a transaction that is a ‘means to an end,’ affording partial liquidity but continued ‘skin in the game.”
For more insights M&A trends in 2015, check out these other market predictions from Washington Technology.