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Record-breaking Trends in Mergers and Acquisitions: Implications and Opportunities

The year 2015 was known as a record-breaking year for mergers and acquisitions in the United States, with the total volume of sealed M and A’s amounting to $4.7 trillion, beating out the record of $4.4 trillion made in 2007. This represents a 42 percent increase from 2014 and signals a wave of changes and trends in the business sector.

The sheer bulk of M&A activity comes from multibillion dollar buyouts and tie-in deals. Healthcare and pharmaceuticals lead the charge with the closing of a deal between drug giant Pfizer and Botox manufacturer Allergan at a whopping $120 billion. And if current trends continue, this spike in M&A transactions would continue well into this year, opening the possibility of yet another record breaking annual total, this time fueled by the consolidation of regional banks.

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The United States in its history has experienced several spikes, in seven key events, in mergers and acquisitions, that signaled a significant change in its economic and business environment. The spike in the 1960s, for instance, marked the rise of the super-corporation as major companies began to diversify their holdings and acquire more businesses. However, this strategy fell out of favor at the turn of the century as more companies turned toward specializing in specific areas.

This new trend is evident in the direction taken by the present batch of mergers and acquisitions, which comprised companies that are expanding laterally, such as Pfizer. The current spike is thought to be the result of difficulties of running a business without a partner in the current economic climates. M&A transactions offer a means for businesses to expand and facilitate growth by making more resources accessible to a company.

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Because this impetus largely remains in place, experts predict that M&A transactions would continue well into the foreseeable future, bar a major financial shock. This could be an opportune moment for entrepreneurs looking for exit strategies as the number of willing buyers increases.

Generational Equity assists companies in planning their exit strategies and finding appropriate buyers for potential mergers or acquisitions.

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