Still Buying – Companies Continue to Make Deals

July 28th, 2011

Jonathan Dionisio

It’s nearly the end of July, which means we are officially in the third quarter of the year. For the past six months, we have witnessed a lot of significant events both locally and globally. As for economic growth, observers said that we are still moving – only at a slower pace. The same thing goes for deal making.

Global mergers and acquisitions (M&A) for the second quarter of the year reached $710 billion (for 9,664 deals), 9 percent lower compared to Q1 2011’s $768 billion worth of deals, according to preliminary data released by Thomson Reuters.

Yes, it may be lower, but the value of businesses that were sold was higher. Deal value for Q1 and Q2 of 2011 was 40.7 percent higher compared last year, with $1.496 trillion. This is to think that deals closed during the first half of 2010 were 2.1 percent higher than the first half of 2011.

It seems like it’s not only the cash-rich strategic buyers that are again buying businesses for sale. Private equity-backed deals were responsible for the spike. According to Thomson Reuters, private equity deal for the first half of 2011 were at $123.57 billion, 8.3 percent of the total deals worldwide. This was 13.6 percent higher compared to the same period in 2010. Although that’s not really close to the peak in 2006, they are making their presence felt again.

Technology related businesses for sale is on top of the mind of private equity buyers as it registered highest in terms of deal volume (336) and market share (13.5%). Surprisingly, real estate businesses ranked second in total market share (13.4%). Also, sold real estate businesses rose by 490.9 percent.

Other industries on the top of their minds are consumer products and services (12.2%), energy and power (11.1%), and retail (8.9%).

One thing is clear: companies continue to think of expansion through mergers and acquisitions. They are actively searching for profitable businesses and companies that have high potential for growth. If they are doing it, so should you. Yes, I am encouraging you to ride the bandwagon and continue searching for potential acquisition opportunities. But don’t just search. Make sure you close that deal and forge your company’s path to a stable future.

Sources:
http://finance.fortune.cnn.com/2011/07/01/ma-activity-slumps-in-q2/
http://www.reuters.com/article/2011/06/24/us-buyouts-idUSTRE75N01X20110624