Grant Thornton: One third of firms plan to grow via M&A
A third of businesses plan to grow through mergers and acquisitions (M&A) in the coming three years, research by Grant Thornton shows. The firm’s report explains that while the availability of available targets is key for a successful M&A market, the shift in the funding landscape making funding more accessible also plays an important role.
Professional services firm Grant Thornton recently released the latest results of its International Business Report (IBR), for which it surveyed more than 5,400 business leaders in 35 economies. The report foresees strong M&A activity over the coming years as underlying growth, interest rates, employment and availability of funding are positively perceived.
The number of businesses that seriously considered an acquisition in the past year grew globally from 29% in 2013 to 43% in 2014. All regions, except for Latin America, saw the intentions of their businesses to acquire other businesses grow. The biggest increase was experienced in North America and Asia-Pasic, which both saw an increase of 7%.
The IBR shows that of the businesses surveyed, a third (33%) plans to grow through an acquisition in the coming years, up from 31% in 2013 and 28% in 2012. The biggest percentage of businesses planning to take this route is found in North America, where almost half (45%) plans to grow this way. A big portion of Latin American businesses (38%), which saw a decline in their acquisition intentions in 2014, are also planning to acquire other businesses in order to grow in the coming three years. In Europe almost a third (32%) and in Asia Pacific almost a quarter (22%) is considering this option.
Changing funding landscape
According to the consulting firm, one key element of the active M&A market is confidence in the ability to fund the transactions. Earnings remain the main source of funding for the coming three years, with 62% of businesses planning their business growth with their earning. However, the IBR indicates that businesses are increasingly confident to find funding through banks, with more than half (57%) of businesses highlighting this option, up from 48% in 2013. Other methods of financing include private equity (21%) and public listing (9%); both slightly up from last year.
Commenting on the results, Mike Hughes, Global Service Line Leader of M&A at Grant Thornton, says: “The results confirm that the M&A market has rediscovered its vigour, with the most dynamic businesses embracing acquisitions as a vital growth tool […] Historically the transaction market has been relatively cyclical but according to our research we may well now be at a point where the objectives and valuations of buyers and sellers are broadly aligned.”
