So far, 2015 is on pace to be the biggest year for global merger-and-acquisitions activity since 2007. As of the first week of November, year-to-date global M&A volume surpassed the $4 trillion mark. That’s larger than the US federal budget and Germany’s GDP.
Several of the deals announced this year are the biggest ever in their respective industries. The planned merger of drugmakers Pfizer and Allergan would be the biggest pharma deal ever; the Marriott/Starwood hookup will create the world’s largest hotel chain; and Anheuser-Busch InBev’s proposed purchase of SABMiller would create a company with nearly 30% of the global beer market and dwarf Heineken, its nearest competitor. The list goes on and on (Charter/Time Warner, Dell/EMC, Anthem/Cigna, Aetna/Humana, Berkshire Hathaway/Precision Castparts — just to name a few).
While the 2015 megamergers get all the ink, First Research’s freshly updated valuation multiples data reveal the flurry of M&A activity this year hasn’t been confined to Wall Street — small business has also seen a surge in acquisitions. The valuation multiples data provided to First Research by Pratt’s Stats offer benchmarks for business acquisitions — big and small — from all over the country and a variety of industries.
The health care sector saw a rise in small-business transactions among physician and dentist offices, home health care, and nursing homes and long-term-care facilities. Other areas of increased small-business M&A activity included property management, restaurants and bars, and business services.
The uptick in small-business M&A action may be getting help from an increase in small-business loan activity. In fiscal 2015 (which ended September 30) US Small Business Administration loan approval activity rose nearly 23% compared to fiscal 2014. Some of these loans likely helped small-business owners purchase local competitors or expand into new geographic markets.
While healthy levels of merger-and-acquisition deals are expected to continue into 2016, many securities brokerages are bearish on the notion that deal making will continue at the pace set this year. However, global M&A activity is expected to increase about 7% in the first quarter 2016 compared to the same period in 2015, according to technology data provider Intralinks.
Activity is forecast to be strongest for consumer products and services, health care, technology, and real estate. Energy, industrial manufacturing, and telecom are expected to experience a slowdown.
Although 2016 should see a strong start, Intralinks’ most recent Global M&A Sentiment Survey revealed deal maker confidence is beginning to erode due to overall economic uncertainty. Key headwinds that could slow 2016 M&A activity include ripple effects of the economic slowdown in China, and the timing and degree of a possible rise in interest rates in the US.
James Bryant is an industry editor for Dun & Bradstreet. Based in Austin, Texas, he writes about issues affecting the global manufacturing sector. He’s been the company’s specialist on the auto industry for 15 years.