Trends in Mergers & Acquisitions 2011

Trends in Mergers & Acquisitions 2011

In the past few years, Mergers and Acquisitions (M&A) activity has been badly hit by the economic crisis. The uncertain economy and lack of credit forced many businesses to abandon their M&A strategies and focus on alliances and joint ventures as a means to enhance technology, vertical markets, and revenue growth.

Although their confidence must be shaken by recent market activity, some lawyers believe that the world economy is beginning to bounce back, and M&A along with it.  Although the deal size and volume are beginning to improve, they are still a far cry from the boom years of 2005 and 2006.

Through the end of 2010, over 21,000 deals were announced with more than $1.9 trillion in total volume. This represented a 1% increase from 2009 volume levels, and marked a sharp reversal in the two-year decline of deal making activity that began in 2008.  (Source:  2011 M&A Outlook, Bloomberg)

2011 is already looking positive for M&A activity.

Figure Source: Berkery Noyes, 2011

We won’t make it back to the boom years any time soon, but there are a number of trends that appear to indicate that 2011 and beyond, will begin to encourage new M&A activity at an increasing rate.  The top 10 trends in M&A activity for the remainder of 2011 include:

1. More companies are deciding to use M&As both for top-line growth and to expand into new areas
2. Companies will become aggressive acquisitors in the area of social media and social media platforms to expand both their customer base and the number of devices each customer accesses
3. Companies will be looking for trend-setting acquisitions that help them keep the online community online and on their websites.  There is also a huge push toward finding the newest IT technology and electronic devices.  Time is of the essence and since there is no time to build, companies will need to acquire
4. Technology, energy, biotech, healthcare, and education are areas in which we expect to see a significant increase in M&A activity
5. Mergers & Acquisitions used to focus on the huge mega deal but macroeconomic fears and market volatility are negating the mega deal today.  Those seeking to acquire will be looking towards middle market companies that can have an immediate impact on operations and create strategic value
6. Leveraged buyouts may be hiding, but they’re not dead
7. Earnouts are making a comeback.  They are, however, full of legal and business issues and must be carefully negotiated
8. Real estate is not roaring back, but debt is becoming available and so, real estate will be a focus of 2011 mergers and acquisitions
9. These days, most companies have some international component, whether it’s customers, manufacturing, sourcing or sales. Hence, many acquisitions will have some type of cross-border implication
10. Although many people believe that change is a good thing, political upheaval will likely have a negative effect near-term on completion of deals involving the Middle East and Southern Europe.

Figure Source: Berkery Noyes, 2011