Most analysts considered 2011 a lost year for mergers and acquisitions. This was not really an accurate statement in the case of deal value nor volume activity. From what we know, it was actually quite good (Read M&A – 2011 Evaluation and What We Have to Look Forward to in 2012). They considered it a loss because M&A lost steam during the last two quarters of 2011. However, according to those same analysts, 2012 offers a different story.

According to Ernst & Young LLP’s Transaction Advisory Services, strong fundamentals, which include robust cash positions, strengthening balance sheets and improved credit markets, combined with a mounting pressure for growth in a low organic growth environment, should generate an uptick in deal flow in 2012.

Fundamentals wise, companies are indeed in a better position as they enter 2012. The amount of cash on corporate America’s balance sheet doubled, now estimated at $2 trillion. Moreover, fifty-five percent of US companies expect asset prices to remain at current levels over the next six months. And to top it off, 36% of US companies say they will pull the trigger on an acquisition in the next year.

“Despite the slowdown in transactions over the past few years, fundamentals have risen to their strongest point since the financial crisis began,” said Rich Jeanneret, Americas Vice-Chair, Transaction Advisory Services at Ernst & Young LLP.

Yes, we understand that we do not live in a perfect world, where everything is always in perfect condition. One of the major game changers is the upcoming 2012 presidential elections. Policy making in the future will heavily affect market outlook. Europe is still a significant factor. Corporate directors are still worried about the effects of the debt crisis in the global economy.  “If Europe doesn’t go off the rails, you’ll see a return to long-term positive factors,” said Steven Baronoff, chairman of global mergers and acquisitions at Bank of America Merrill Lynch.

But James C. Woolery, JPMorgan Chase’s co-head of North America mergers and acquisitions, believe that executives will look over these possible obstacles.  “We’re optimistic that the need and desire for growth will overcome the volatility headwinds, but that’s where the battle will be waged.”

I admit, it’s not always easy to be optimistic during a very volatile period. But one thing is always certain: we control our future. In your case, you control the future of your company. Your optimism (or pessimism) about the market, and how much you want your company to grow this year are key. The choice to pursue buying a business is yours.

Do you share the same sentiment? Please share your predictions and thoughts by leaving a comment below.

Sources:
http://www.ey.com/US/en/Newsroom/News-releases/Ernst-and-Young-says-fundamentals-will-finally-prevail-over-uncertainty-to-get-deals-rolling-in-2012
http://blogs.wsj.com/deals/2012/01/03/the-2011-ma-market-not-as-bad-as-we-thought/
http://online.wsj.com/article/SB10001424052970204720204577127671684099542.html
http://dealbook.nytimes.com/2012/01/02/on-wall-street-a-renewed-optimism-for-deals/