By Rob Starr, Content Manager, Big4.com
KPMG International’s latest Global M&A Predictor shows that the confidence to undertake significant M&A is predicted to return to the world’s largest companies. However, the tides seem to be finally turning as over the past 6 months, global confidence is actually rising to match capacity. In comparison with June 2012, the difference in appetite is dramatic. In the previous edition of KPMG International’s M&A Predictor, analyst predictions showed that appetite levels for M&A were falling across the board. In other words – confidence was dropping everywhere. At the end of 2012, confidence is rising in almost every country covered by the data. Clearly, a lot can happen in 6 months.
Despite on-going troubles in the Eurozone, European companies are looking particularly confident according to the Global M&A forecast , with forward P/E ratios (measuring appetite) up 19 percent on June 2012 and up 16 percent over 12 months. European forecast net debt to EBITDA ratios are similarly positive, showing an increase in capacity of 12 percent over the next year as companies capitalize on the low interest rate environment to pay down debt.
Tom Franks, Global Head of Corporate Finance at KPMG International and a partner in the UK firm, comments: “The outlook for 2013 is more positive than it has been for over 2 years and undeniably this is a winning combination for the health of the global M&A market. Companies are ready to throw off the shackles of austerity in the hunt for new opportunities.”
“The Global M&A Predictor is also telling us that confidence is up across all sectors, as the overall macroeconomic picture becomes more stable again. Franks adds, “The US elections are over, the ‘fiscal cliff’ crisis has been averted or at least deferred, and China has begun the transition to a new leadership team so we can now see that there is more certainty than there was 6 months ago, and that is feeding through into transactional confidence and capacity levels.”