M&A Trends to Watch for in 2014


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General predictions about 2014 M&A market, discuss ripe sectors and deal terms trends

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M&A Trends to Watch for in 2014

  1. 1. M&A TRENDS TO WATCH FOR IN 2014 Roger Royse Royse Law Firm, PC Palo Alto, San Francisco, Los Angeles rroyse@rroyselaw.com www.rogerroyse.com www.rroyselaw.com Skype: roger.royse Twitter @rroyse00 IRS Circular 230 Disclosure: To ensure compliance with the requirements imposed by the IRS, we inform you that any tax advice contained in this communication, including any attachment to this communication, is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to any other person any transaction or matter addressed herein.
  2. 2. GENERAL PREDICTIONS • Experts Bullish on 2014 – 68% of executives and outside advisors surveyed believe the 2014 M&A market will be stronger than 2013. (Dykema Survey). – M&A deals should increase 10-15%. (Morgan Stanley). – 63% of M&A professionals surveyed anticipate their clients to initiate at least one acquisition and 36% anticipate clients to complete a divestiture. (KPMG Survey). • More Smaller and Mid-Market Deals – “Seventy-seven percent of respondents expect their respective deal activity will be valued under $250 million, followed by 12 percent who anticipate their acquisitions will be valued between $250 and $499 million, and five percent between $500 and $999 million.” (KPMG Survey). • Why are they Bullish? – – – Excess cash on the balance sheet, i.e. inflated stock prices Historically low interest rates 2013 Momentum: “volume increased by 10 percent from 808 deals per month in the first six months of 2013 to 886 deals per month from July through November.” (PwC).
  3. 3. RIPE SECTORS • Media & Telecommunications ― 44% of M&A Professionals expect this sector to have the most activity. (KMPG Survey) ― There is “pent-up demand” for M&A activity in the media. (KPMG) ― Media Deals during the first three quarters in 2013 totaled $77.1 billion, up from $49.8 billion in 2012 and the number of deals was up 55%. (PwC) • Real Estate ― Fastest Growing Industry in the US ― In 2013, deal volumes increased by 40%. (PwC) • Health Care and Pharmaceuticals ― 41% of M&A Professionals expect this sector to have the most activity. (KPMG Survey)
  4. 4. DEAL TERMS TRENDS • KPMG Survey – – – – – • 70% surveyed said tax planning Is important 26% consider tax after deal terms closed 39% said tax considerations cause deals to be more complicated 32% said no increased deal complexity resulting from tax Top M&A Challenge is valuation disparity, meaning more earnout structures Nixon Peabody MAC Study – – – – 98% contain a MAC closing condition (up from prior year) 89% have “disproportionately affect” carveouts (up from prior year) 53% “would reasonably be expected to” (up from prior year) Increase in exclusions to MAC (pro-target)
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  6. 6. Contact Us Palo Alto Office: 650-813-9700 PALO ALTO 1717 Embarcadero Road Palo Alto, CA 94303 SAN FRANCISCO 135 Main Street 12th Floor San Francisco, CA 94105 LOS ANGELES 11150 Santa Monica Blvd. Suite 1200 Los Angeles, CA 90025 www.rroyselaw.com @RoyseLaw