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EY: US dealmaking in 2nd half of 2015 set to outpace 1st half of year

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EY: US dealmaking in 2nd half of 2015 set to outpace 1st half of year

Private equity “chomping at the bit;” middle market M&A picks up.

Deal activity in the first half of 2015 had one of the strongest starts in recent memory, but the second half of the year will see even more mergers and acquisitions (M&A), according to professional services firm EY. For the first time in five years, more than half of US companies are planning acquisitions over the next 12 months. M&A value surged 55% to $1.143 trillion in the first six months of 2015. US deal volume, however, dropped slightly by 4%, with 5,822 deals announced so far, compared to 6,040 in the first half of last year.

A number of headline popping megadeals drove deal values to near record highs in the first six months of 2015, particularly in the life sciences sector. There were 31 deals announced valued over $10 billion in the first six months of 2015, compared to just 18 in the same period last year, and the highest number ever announced for the first half of a year. It is not just the megadeals that are making noise however, middle-market M&A also picked-up in the first six months of 2015 with 268 deals announced in the $500 million-1 billion dollar range, up from 257 deals in the first half of 2014. In the $100-500 million range there were 1,480 deals in the first half of 2015 up from 1,364 in the first half of 2014. According to a recent survey from EY, 89% of US companies are planning lower middle-market deals in the next year. This activity will likely be driven by a greater number of smaller, more innovative acquirers re-entering the market after a prolonged period of inactivity.

"Following an incredibly strong 2014, 2015 is shaping up to be a very good year for M&A," said Rich Jeanneret, EY Americas Vice Chair, Transaction Advisory Services. "US deal pipelines are full and companies are exuberantly seeking assets to grow and transform their businesses. After a period of intense focus on cost control and organic growth, CEOs are coming off the bench and doing significant deals, but they are keeping their eye on the ball and taking a disciplined approach to the deal frenzy."

89% of US companies are planning lower middle-market deals in the next year.

The improving economy, sustained low interest rate environment, and strong US dollar are just some of the factors that are driving acquisitions. Not everyone is acquiring however, a number of companies are looking at divestitures, carve-outs, splits, and spins to optimize their portfolios and focus on core assets that will drive growth. According to a recent EY report on divestments, more than half of companies expect the number of strategic sellers to increase in the next year. This suggests that there will be plenty of available assets for those that are ready to transact.

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