TORONTO, February 13, 2013 – Confidence to undertake M&A is predicted among Canadian companies, according to KPMG’s latest Global M&A Predictor. Not only do companies appear to have their appetite back, they also have the capacity to transact. Over the last two years, the capacity for deals has been steadily rising as companies have focused on reducing debt and building cash reserves.
“We are seeing significant transaction appetite, with Private Equity having capital to deploy and corporate balance sheets having significant capacity to transact,” said Neil Blair, Partner, KPMG Corporate Finance. “The outlook for 2013 is more positive than it has been for over two years – the winning combination of confidence, capital and capacity bodes well for the health of the Canadian M&A market.”
KPMG’s International January 2013 M&A Predictor [PDF 1.51MB] found:
- Global forward P/E ratios (an appetite measurement) have risen 15 percent over the past 6 months and 12 percent year-on-year
- The forecast net debt to EBITDA ratio shows an expected improvement in capacity to transact of 15 percent over the next year
- In the U.S., appetite rose by 10 percent and capacity by 21 percent since June 2012
- From healthcare to industrials to technology, confidence and capacity are up across all sectors
In the previous edition of KPMG’s M&A Predictor, analyst predictions showed that appetite levels for M&A were falling across the board – confidence was dropping everywhere. By the end of 2012, however, confidence was rising in almost every country covered by the data.
“In Canada, we are finding that in an environment where GDP growth is modest, corporations are looking at acquisition-led growth both domestically and internationally,” said Blair. “As the overall macroeconomic picture becomes more stable, Canadian corporations are prepared to pay for new growth opportunities.”
KPMG’s Global M&A Predictor, established in 2007, is a forward-looking tool that helps member firm clients to forecast worldwide trends in mergers and acquisitions. The Predictor looks at the appetite and capacity for M&A deals by tracking and projecting important indicators 12 months forward. The rise or fall of forward P/E (price/earnings) ratios offers a good guide to the overall market confidence, while net debt to EBITDA (earnings before income tax, depreciation and amortization) ratios help gauge the capacity of companies to fund future acquisitions.
The Predictor covers the world by sector and region. It is produced bi-annually, using data comprised from 1,000 of the largest companies in the world by market capitalization. The financial services and property sectors are excluded from our analysis, as net debt/EBITDA ratios are not considered relevant in these industries. All the raw data within the Predictor is sourced from S&P Capital IQ. Where possible, earnings and EBITDA data is on a pre-exceptionals basis with the exception of Japan, for which GAAP has been used.
As one of the world's leading transaction advisers, KPMG provides a coordinated portfolio of Corporate Finance services, including mergers, acquisitions, divestitures, debt and equity financing, and fairness opinions. Acting independently of financing sources, we provide clients with pure, objective advice, focusing on strategies that can help meet corporate objectives.
In 2011, KPMG Corporate Finance Inc. ranked first on Thomson Financial Securities Data's ranking of the world's leading M&A advisers, based on the number of deals successfully completed. For over 10 consecutive years, we have ranked as one of the top two M&A advisers in the world.
KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) and a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG International Cooperative (“KPMG International”). KPMG member firms around the world have 152,000 professionals, in 156 countries.
The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss entity. Each KPMG firm is a legally distinct and separate entity, and describes itself as such.
Follow @KPMG_Canada on Twitter and linkedin.com/company/kpmg-canada on LinkedIn for more on the M&A Predictor.
National Coordinator, Media Relations
KPMG in Canada