M&A and IPO activity in the U.S. ended on a high note in 2013. Merger volume picked up in the second half of the year as companies took advantage of a low interest rate environment. Although the number of global deals in 2013 was comparable to the prior year, the United States tally grew 11% over the period and accounted for over 43% of all mergers worldwide. Rebounding stock prices will likely pressure companies to justify higher trading multiples by chasing growth, and many could respond by making acquisitions.
The number of IPOs also increased in 2013, growing from 140 in 2012 to 258 in 2013 with venture-backed companies posting their highest number of offerings since 2007. Private equity firms also began to take a more active role in IPO activity throughout the year, backing 43 deals in 2013. Investor sentiment has strengthened over the year as valuations have increased and stock volatility has remained low. Combined with the expectation of market resurgences in Asia and Europe, IPO activity is projected to continue expanding into 2014.
Greater competition for deals and rising valuations in the United States have led some private equity firms to seek returns through less expensive (and non-conventional) minority investments and partnerships rather than buyouts. According to some observers, the unconventional deals appear to be motivated by a lack of buyout opportunities even as the industry ended the year with the highest amount of “dry powder” since 2009.
With a strong finish to 2013, there is renewed optimism that the momentum achieved in M&A and the IPO markets will carry on into 2014. Mercer Capital’s valuation experts have years of experience in assisting companies with accounting for business combinations across a variety of industries and transaction structures. Give us a call to discuss your valuation issue in confidence.
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