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M&A trends report 2016

Is last year's record pace sustainable?

Coming off a record year for mergers and acquisitions (M&A), an overwhelming majority of executives at US corporations and private equity firms forecast that deal activity will stay strong or even ramp up. What M&A trends are driving their optimism? What factors could potentially put the brakes on? Our third annual trends report asks M&A leaders for their predictions.

Executive summary

Deal activity is expected to remain strong. Almost nine in 10 respondents expect deal activity to continue at the same pace or increase. While private equity investors (PEI) were the most optimistic, they are less bullish than they were a year ago.

Corporate respondents and private equity investors cited economic conditions as the top factor for deal success. Both segments of respondents cited interest rates as the second most important factor, followed by uncertainty surrounding the 2016 US elections.

Corporations see an increase in both smaller strategic deals and major transformational deals. As respondents look at the next 12 months to take advantage of favorable opportunities, 34 percent will look for smaller strategic deals while another 26 percent indicate they will seek major transformational deals.

Companies are holding steady in looking abroad. Both corporates and PEIs are continuing to source foreign targets at the same pace as 2015 (75 percent and 84 percent, respectively).

More divestitures are planned for 2016. Significantly more corporate respondents plan to pursue divestitures this year than in 2015. The drivers? Shed non-core assets in the year ahead, help focus their business, and in some sectors, raise capital.

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