Private equity and strategic-driven merger and acquisition activity is expected to increase in 2015, according to Deloitte's newly released M&A Trends Report 2015.
Deloitte's survey of 2,500 buyout dealmakers and U.S. corporate executives found that financial sponsors and strategic buyers expect M&A activity will continue to remain robust this year. Ninety four percent of private equity executives and 85 percent of business executives surveyed anticipate that deal activity in 2015 will remain strong.
Moreover, a strong M&A environment is forecast for both private and public businesses amid today's low interest rate environment and bullish U.S. equity markets, with multiple industry sectors including technology and healthcare expected to continue experiencing plenty of deal activity, including across the small cap, mid-market and large cap market segments.
Private equity respondents of the Deloitte study also anticipate increasing their number of add-on acquisitions, as well as exits from portfolio companies in 2015. Additionally, there's strong interest in carrying out cross border transactions by both strategic and financial buyers.
For instance, 85 percent of financial sponsors indicated that they expected to execute deals involving a company domiciled in a foreign market as compared with 73 percent a year earlier. Whereas among strategic acquirers, 74 percent indicated they are pursuing foreign M&A deals as compared with 59 percent last year.
In spite of the sanguine outlook by both corporate and financial buyers on transaction activity, the Deloitte study found that both strategic acquirers and private equity groups expressed disappointment when it came to their return on investment from M&A activities. Ninety percent of corporate respondents said that their completed transactions fell short of generating the returns they'd expected, while 96 percent of financial buyers noted their deals also fell short when it came to meeting return targets.
The study stems from Deloitte's polling of 2,092 executives at U.S. companies and 408 executives between January 2015 and February 2015 about each group's expectations for M&A activity in the coming year. The private equity portion of survey respondents was comprised of 38 percent of the firms that controlled funds totaling less than $500 million; 43 percent with funds of assets between $500 million and $3 billion; and, 18 percent from funds with more than $3 billion in investments.