After a tough 12 months compounded by over-optimistic earnings expectations, accountancy firm KPMG has tentatively predicted a return to 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 had overestimated corporate earnings in 2009 by some 20%, which had skewed a clear view of the market.
However, he continued, “the latest company earnings forecasts look far more sensible, suggesting reality has finally caught up with the market.”
“The modest increase in corporate capacity and appetite to do deals feels, from an M&A professional’s perspective, far more realistic than predictions made this time last year,” added Simpson.
“It is important to highlight, however, that this data is very much about the corporate market. The private equity market is much more dependent upon high levels of debt, putting it at a disadvantage until bank lending picks up,” he said.
According to KPMG’s number-crunchers, M&A growth this year will therefore be led by corporates and IPOs.
Happily, technology emerged as one of the healthiest looking sectors with IT firms exhibiting relatively strong financial performances.
“It would not be at all surprising to see the technology sector lead the way in driving forward M&A activity on a global basis,”said KPMG technology partner Jonathan Stankler. “Equally, to the extent that the IPO pipeline materialises, technology companies are likely to feature strongly.”
In fact, this trend may already be picking up across the Pond, 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 Associates suggested that after a turbulent 18 months, levels of M&A activity in the industry were returning to stable levels, with a more even balance between buyers and sellers evident.