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91% of US corporate leaders planning on making an acquisition in 2016

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91% of US corporate leaders planning on making an acquisition in 2016

Tech, pharma & biotech lead deal momentum; US remains most active.

In pursuit of growth, company leaders are turning increasingly to mergers & acquisitions. In fact, 91% intend to initiate at least one acquisition in 2016, up significantly from 63% in 2014, according to an annual survey by professional services firm KPMG LLP.

The study also found that 43% of the corporate leaders expect to make five acquisitions or more in 2016.

"US corporate leaders and private equity executives are indicating that we can expect a very bullish outlook for M&A in 2016," said Dan Tiemann, KPMG's national service group leader for Deal Advisory and KPMG Strategy. "They are pursuing aggressive growth plans using M&A to fundamentally expand their capabilities or evolve business models to access new customers or introduce new products." 

69% do not believe that current market valuations are sustainable.

The survey found that executives are shifting their strategic focus from consolidation and a desire to fortify their competitive position in 2015 to expansion. They indicate that entering new lines of business (37%) and expanding their customer base (37%) and geographic reach (36%) are their primary motivators for initiating deals in 2016.

Though the corporate leaders see more aggressive M&A growth ahead, they do note some factors that may inhibit stronger deal flow. Forty-two percent of the executives see the potential for a slow growth environment, while 69% do not believe that current market valuations are sustainable.

Tech, Pharma & Biotech Expected to Drive Activity
The survey found that respondents anticipate the heaviest deal activity to take place in the technology sector (70%), up significantly from 47% in 2015.  The pharmaceutical & biotechnology sector is also leading the way, at 60% up from 33% in 2015. Other sectors of note are financial services (48%), healthcare (47%), and media/telecommunications (42%).

US Market Tops for Transaction Investment
The US remains the most attractive destination for M&A activity with 79% of executives planning to invest in the region in 2016, up from 56% in 2014. The United States far outpaces other regions such asWestern Europe, the rest of North America and Asia.

"The U.S. is still the most vibrant, innovative, an attractive economy, offering the greatest potential for new market growth," said Tiemann.

 

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