M&A volumes set to increase as privately held businesses anticipate the return of financial and trade buyers

10 February 2010

62% of businesses believe that the upturn has started already or will take place during the course of 2010 according to the Grant Thornton International Business Report (IBR) which has been surveying the views of privately held businesses (PHBs) for 18 years. In its latest study conducted in late 2009, the proportion of respondents anticipating a change of ownership increased to 10% this year compared with 6% twelve months ago. Of those, 27% anticipate selling to a trade buyer compared to only 18% last year, and 25% expect to sell to a financial investor (22% in 2009).

Mike Hughes, global leader - mergers and acquisitions for Grant Thornton International, explains, "At the start of 2010 PHBs are showing real signs of optimism both in their belief that the upturn has already started or is about to do so, and in their confidence that traditional exit routes of trade and financial buyers are once again open."

Not surprisingly the survey also revealed that despite an improving economic outlook, PHBs are naturally cautious when asked about their intentions for acquisitions. The proportion of respondents considering this globally fell from 37% to 26%, with the steepest falls recorded amongst the BRIC economies (see figure 1).

However, this still leaves a substantial proportion of entrepreneurial firms still wanting to grow through M&A and this is likely to increase if optimism about a global economic recovery spreads and credit markets ease.

For those businesses that do have cash resources, the combination of a more stable global economy and comparatively low valuations is throwing up interesting acquisition opportunities. Grant Thornton member firms are reporting a clear revival in M&A activity, a change evident both in the number of transactions being completed and in a general shift in mood.

Regionally, the US and Canada, while showing a decline in the proportion of businesses planning an acquisition compared to last year, are still well above the global average (32% and 35% respectively) as businesses in North America recognise M&A as a valid strategic tool to ensure they are well positioned for an upturn in the global economy.

Stephen McGee, M&A executive director at Grant Thornton US explains, "Over the last 18 months many businesses have taken actions to reduce costs. 2010 is likely to see some stronger PHBs undertaking strategic acquisitions or mergers to drive further efficiency, resume growth and enhance margins."

Elsewhere in the world, there are pockets of confidence. For example, Poland, which avoided recession, actually posted a year on year increase with 66% of businesses planning to grow through acquisition in the next three years. Indian PHBs are among the keenest to make cross-border acquisitions, with as many as 42 per cent expecting their deals to be international.

Mahad Narayanamoni, M&A partner from Grant Thornton India believes this reflects a coming of age for Indian businesses. "Indian companies are now more experienced in dealing with overseas M&A transactions and are considered serious contenders for acquiring global businesses.  Acquiring global brands, gaining access to overseas markets and leveraging new technologies for Indian markets are some of the key drivers for outbound acquisitions by Indian companies."

Grant Thornton member firms offer specialist M&A advice in every important trading centre in the world.

For further information please contact: 

Christine Hobart 
International communications manager
T +44 (0) 20 7391 9548
E christine.hobart@gtuk.com