Grant Thornton LLP recently published its annual International Business Report (the Report). The Report, which aims to chart appetite for M&A around the world, is based on interviews with more than 12,500 chief executive officers, managing directors, chairmen and other senior decision-makers across all sectors. The Report’s findings, while varied, all point to the importance of M&A activity as a driving force for growth, as there was a clear acknowledgement from those surveyed that acquisitions are needed if business hope to grow.
The Report displayed stronger numbers in comparison to the previous year’s findings. Canada’s numbers were especially strong in comparison to the global average, suggesting the country’s businesses are poised to experience growth via M&A activities in the near future. While 31% of businesses globally stated that they had plans to look at M&A opportunities over the next three years, 40% of Canadian businesses signaled their intentions to seek out M&A during the same period.
The Report’s results suggested several key industry sectors to watch for M&A activity, including: (i) mining, (ii) technology, (iii) financial services, and (iv) healthcare.
While the mining industry has been quiet over the last couple of years due to slower global economic growth and depressed commodity prices, M&A in the mining industry is expected to pick up in the near term, with 45% of companies stating they intended to look for M&A opportunities. More buying opportunities are being presented to sector participants able to fund acquisitions, and companies willing and able to grow are expected to increase their M&A activity.
With ever increasing digitalization and globalization, companies in the technology sector are likely to benefit from vertical and horizontal integration. 45% of surveyed businesses indicated that they were eager to pursue M&A as a strategy for growth; a 5% increase from the previous year. We should therefore expect to see a healthy amount of M&A activity flowing from the technology industry.
The financial services industry continues to have a cautionary attitude towards M&A, however, the Report says the effects of increasing regulatory demands and more stringent monitoring of capital have left some firms with capital which could be used for M&A. Improved market conditions, paired with an increased availability of financing options may therefore have a positive effect on the financial services industry’s willingness to re-enter the M&A market. 43% of businesses in the financial services industry signaled their intention to seek out M&A opportunities; that number is up 12% from the previous year’s results.
Finally, the Report discusses M&A activity in the healthcare industry. The Report points to healthcare services, especially in ASEAN countries, where a large and increasingly aging population is encouraging healthcare consolidation. Expect to see increased M&A in this industry, with 37% of surveyed businesses signaling their intention to engage in M&A activity.
The results of the Report suggest that we are going to be entering a busy phase for the M&A market: businesses around the world and in varying industries are increasingly embracing acquisitions and seeing M&A as a vital strategic tool.