It looks like U.S. dealmakers may have their hands full with M&A transactions next year.
As 2012 comes to a close there’s an influx of deals hitting the table, and the surplus of deals may spill over into the first quarter of the New Year, according to PwC’s U.S. M&A outlook report. The report stated that buyers' continued access to capital and financing, solid balance sheets, as well as divestitures, will fuel the deal pipeline in 2013.
Divestitures accounted for 43 percent of total disclosed deal value and 30 percent of deals overall, the highest level since 2005.
"Successful divestitures in today's marketplace require a sharp focus and rationale around the opportunities that an asset has to grow," Ron Chopoorian, PwC's U.S. Divestitures Leader, said in a statement. "An accurate portrayal of long-term deal value for an asset helps ensure that a buyer and a seller can meet at a reasonable price and unlock value and opportunity for the future of both companies involved in the deal. With preparedness and rigor around the sell side process serving as essential components for successful divestitures, we are seeing auctions become broader and participants 'staying in play' for longer periods of time."
Martyn Curragh, PwC's U.S. Deals Leader, added that the fundamentals for sustained M&A activity in 2013 are solid, given that strategic buyers are more confident, private equity activity from both a buy and sell side perspective have increased, and the debt markets are healthy.
"There remains strong competition for quality assets as both corporate and private equity continues to seek out deals to fuel their growth and deploy capital," said Curragh. "We've been supporting a range of buyers and sellers across a broad spectrum of industries, helping them raise capital through high-yield offerings and providing diligence and valuation analyses for potential deals. Dealmakers have been very cautious and disciplined in evaluating transactions. They are placing a premium on a thorough analysis of potential risks and exposures and are seeking to ensure there is broad functional support to successfully manage deal execution and reduce the risk of value leakage."
Of the private equity landscape, PwC stated that firms are preparing for multiple exit options, including refinancing debt, recapitalizations, IPOs and sales to strategic buyers. On the buy side, private equity remains an active deal participant, especially in the middle market, and with divested corporate assets. PwC classifies middle-market transactions as having a deal value of $1 billion or less. The increased availability of high-yield debt is a main driver fueling private equity activity in the U.S. marketplace.
As far as the hot sectors that will be in the midst of fruitful M&A activity in 2013, attention will be on the oil and gas, financial services, health care, pharmaceuticals and technology industries.
For more information, visit www.meetpwc.com/MandAoutlook2013.