Q. WHAT’S THE OUTLOOK FOR DEALMAKING IN 2015?
TOM McGEE: 2015 is off to a strong start and it seems robust deal activity will continue, if not intensify, in the near term. Sectors driving sustained growth include life sciences, oil and gas, technology, process and industrial products, and consumer goods. Geographically, the United States looks to remain the center of activity, given its improving economy, the questionable stability of emerging markets, and aspirations of European companies to escape their own sluggish economies.
Companies and investors should watch for geopolitical risk and other issues impacting the broader global economy such as falling oil prices and the rising U.S. dollar. It’s also important to keep in mind the complexity of deals and the numerous factors that play into a deal’s success— strategy and planning, due diligence and data analytics, and integration.
Q. WHAT’S DRIVING THIS SPIKE IN DEAL ACTIVITY? IS IT THE IMPROVING ECONOMY, OR ARE OTHER FACTORS AT WORK?
TM: The improving economy is certainly a welcome change compared with weak U.S. economic growth over the past few years. The strong stock market, as well as large stockpiles of cash, has been used to finance many of the mega-deals we’ve seen of late. The recent rally in the U.S. dollar could lead to a spike in cross-border deals as well, and we expect North America to remain the leader in M&A around the world in terms of deal volume.
All in all, companies are pursuing M&A as part of their growth strategies to obtain new customers, enter new geographies, and offer new products and services. These goals can be achieved organically over time, but M&A allows for a stronger market position more quickly.
Tom McGee is national managing partner of Deloitte’s Merger & Acquisition Services, overseeing services to corporate buyers and private equity investors. He has extensive experience serving mid-market public and private companies as well as some of Deloitte’s largest clients. McGee is a frequent commentator on CNBC, Fox Business Network and other media.