After a tough 12 months compounded by over-optimisticearnings expectations, accountancy firm KPMG has tentatively predicted a returnto M&A growth this year.
Unveiling its annual Global M&A Predictor this morning,KPMG’s global head of M&A, David Simpson, said that analysts hadoverestimated corporate earnings in 2009 by some 20%, which had skewed a clearview of the market.
However, he continued, “the latest company earningsforecasts look far more sensible, suggesting reality has finally caught up withthe market.”
“The modest increase in corporate capacity and appetite todo deals feels, from an M&A professional’s perspective, far more realisticthan predictions made this time last year,” added Simpson.
“It is important to highlight, however, that this data isvery much about the corporate market. The private equity market is much more dependentupon high levels of debt, putting it at a disadvantage until bank lending picksup,” he said.
According to KPMG’s number-crunchers, M&A growth thisyear will therefore be led by corporates and IPOs.
Happily, technology emerged as one of the healthiest lookingsectors with IT firms exhibiting relatively strongfinancial performances.
“It would not be at all surprising to see the technologysector lead the way in driving forward M&A activity on a global basis,”said KPMG technology partner Jonathan Stankler. “Equally, to the extent thatthe IPO pipeline materialises, technology companies are likely to featurestrongly.”
In fact, this trend may already be picking up across thePond, as evidenced by wireless specialist Meru Networks’ proposed $86m (£52m)IPO, which was filed with the SEC just before Christmas.
Last week research from merger specialists Regent Associatessuggested that after a turbulent 18 months, levels of M&A activity in theindustry were returning to stable levels, with a more even balance betweenbuyers and sellers evident.