By all accounts, 2015 should be a record year for M&A. Total US M&A activity YTD 2015 was at $1 trillion—the highest level for a first half since records began in 1980. Global M&A has reached $3 trillion YTD—the second highest on record through July, only behind 2007.
Will the trend continue? The signals point to yes, and here are some of the reasons:
Cash availability: Strategic buyers still have record levels of cash, and private equity firms are continuing to raise money for more deals. Stock prices are at decent levels as well.
Low Interest Rates: US interest rates are very low, and while banks may be getting tighter and interest rates should be going up, there is still a lot of debt available for M&A. Debt levels at corporate acquirers are low, so there is capacity available for acquisition purposes.
Economic Growth: The level of economic growth is slow but steady, which means that many buyers need acquisitions to continue to grow the top line.
Lack of External Obstacles: For several years in the past, the US has experienced government shutdowns, budget crises, or has been affected by major overseas crises. For some time now, we have seen relatively smooth sailing on these fronts. The coming presidential election in 2016 may keep US politicians from repeating the brinkmanship of the past.
Retiring Business Owners: There is quite an overhang of business owners who want to retire (and younger owners willing to take the next step). Valuations are at the highest levels since 2007, which is encouraging owners to come to market.
While there are some concerns for today's M&A market (Greece, Puerto Rico, Ukraine, rising interest rates, rising dollar, slow growth, etc.), all signs point to a strong market to continue for some time.
