By SAABIRA CHAUDHURI
Although the first quarter of next year may be slow in
merger activity, "sound deal fundamentals" indicate that the
rest of 2013 will be a stronger year for US mergers and
acquisitions, according to a new report from accounting firm
PwC said an acceleration of deals taking place during the
final months of this year may result in a lull in activity
during the first quarter of next year; however, ongoing access
to capital and financing, strengthened balance sheets and
divestiture activity will continue to fuel deal activity in
"The fundamentals for sustained M&A activity in 2013 are
solid, with improving corporate confidence, increasing private
equity activity from both a buy and sell side perspective, and
relatively healthy debt markets," said PwC's US deals leader
"There remains strong competition for quality assets as both
corporates and private equity continue to seek out deals to
fuel their growth and deploy capital."
According to the firm, in the 11 months that ended in
November, there were a total of 7,585 transactions representing
$705 billion in disclosed deal value.
PwC noted that in October alone, deal value spiked to a
14-month high, reaching $96 billion. It said with 754 deals,
October was the most active month since August 2011.
In terms of deal size, PwC said middle-market deals have
been the "silver lining" for deal activity, accounting for 98%
through November. PwC expects this trend in middle market deals
to continue in 2013.
Divestitures accounted for 43% of total disclosed deal value
and 30% of deals overall, the highest level since 2005. PwC
said these would remain a key driver for deal making in the
year ahead as companies seek to unlock value in assets.
With a total of 1,334 transactions and $128 billion in
value, private-equity deals accounted for 18% of total deal
Among the sectors that are presenting opportunities, PwC
listed oil and gas, noting that volume and value levels are
close to 2011 levels with an increase in mega deals led by
private-equity funds that have increased their investment and
exposure to the energy industry. PwC said it expects deal
activity to increase in 2013, with ongoing consolidation in the
shale plays very likely.
It also singled out financial services, saying both domestic
and global financial institutions continue to seek divestiture
of nonstrategic operations in seeking to further bolster
capital levels and unlock asset value. At the same time, it
said, as organic loan growth has slowed, many banks will look
to acquire asset-generating businesses.
PwC expects valuation gaps will narrow which, coupled with
resolution of regulatory uncertainty, will likely drive
increased deal volume in the coming year.
The firm expects 2013 to be a "banner year" for mergers and
acquisitions in the field of healthcare and pharmaceuticals
amid what it calls the near-certain implementation of the
Affordable Care Act and its sweeping reforms impacting business
PwC also said it expects a slight reduction in full-year
acquisition value among technology companies, due in part to
the global macroeconomic environment. More optimistically,
the firm said it is seeing very early signs of growing activity
among large technology companies to re-evaluate
their product and business portfolios and initiate
Drivers for future deal activity in the sector include changes
in enterprise customers' demand towards cloud technology
services, continuing high growth in social and mobile sectors
and a favorable appetite among technology-oriented private-equity
funds for slower growing but cash-flow-producing assets.
Dow Jones Newswires