Ernst & Young: 2013 Deal Activity Will Remain Near 10-Year Low

By Rob Starr, Content Manager, Big4.com

US deal flow is likely to remain tempered in 2013 with activity remaining at or near a 10-year low. Ernst & Young LLP’s Transaction Advisory Services says macroeconomic ambiguity combined with a continued corporate focus on lower risk, organic growth opportunities and smaller, strategic deals will define deal-making in 2013.

Fewer US companies report plans to execute an acquisition in the next year as appetite for M&A fell to 23% from 34% six months earlier, according to Ernst & Young LLP’s US Capital Confidence Barometer.¹  Of those companies that are planning an acquisition, 81% say they will consider deals worth US$500 million or less, suggesting that deals next year will be smaller and focused on filling strategic gaps and extending existing businesses.² Private equity (PE) firms have a slightly more positive outlook, citing improving fundraising and confidence in credit availability.

At the end of 2011, conditions looked promising, and experts pointed to an M&A revival for 2012. However, persistent economic uncertainty, Eurozone turmoil, slower growth in emerging markets, a looming fiscal cliff with a prolonged lack of clarity in the US around tax reform and healthcare legislation depressed the global economy, and companies around the world turned their focus inward. There is slim chance of a short-term turnaround in the global economic slump and the ongoing slow growth in the US. According to the US Capital Confidence Barometer, 76% of US companies think the global economy shows no signs of improvement.