Despite warnings of a cooling China economy and hike in oil prices, the appetite for M&A will remain strong especially in APAC and the US
M&A levels is set to remain strong in 2016, with deals rising by an average of four percent globally, according to a KPMG International Global M&A Predictor report. This in spite of a cooling Chinese economy, rising interest rates and oil price hikes in the US.
The capacity of corporates to fund M&A growth is expected to rise by 13 percent on average this year. The breakdown by region is as follows :
- Asia-Pacific (excluding Japan) – 19 percent increase
- Africa– 18 percent increase
- Middle East– 18 percent increase
- US – 16 percent increase
- Singapore – 15 percent increase
By sector, technology is set to emerge as the star performer, with an expected increase of 90 percent in investment capacity.
KPMG’s Global M&A Predictor, is a forward-looking tool that helps member firm clients to forecast worldwide trends in mergers and acquisitions. The Predictor looks at the appetite and capacity for M&A deals by tracking and projecting important indicators 12 months forward. The report is produced bi-annually using data comprised from 1,000 of the largest companies in the world by market capitalisation.
What’s the cause?
While outlook on the state of economy may appear gloomy on the surface, analysts cite the paring down of debt over the past few years as a key factor behind the bullish M&A predictions.
“Transactional activity is expected to remain relatively strong due to relatively low cost of financing and the hunger for inorganic growth in the current weak economy,” said Benjamin Ong, Head of Mergers & Acquisitions and Capital Advisory, KPMG in Singapore, in an official press release.
“Singapore companies have maintained healthy balance sheets and have the capability to finance M&A activity to boost market share and keep up with competition in the increasingly consolidated marketplace,” he added.
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