Global appetite for M&A deals shows dramatic increase
Yet, deal completions continue to struggle, with values of completed deals falling to a low

An improving global economy and large corporate cash reserves contributed to a 26 percent increase in the value of announced mergers-and-acquisitions (M&A) deals between January and June of 2014.

Despite this dramatic increase, the number of completed deals fell by two percent over the same period, according to the latest KPMG M&A Predictor.

The value of completed deals also continued their downward trajectory of recent years, reaching their lowest point of the last 12 months in June 2014.

The predictor is a forward-thinking tool that forecasts worldwide trends in M&A and is produced twice a year, using data comprising 1,000 of the largest companies in the world by market capitalization.

"Overall, prospects for the M&A scene are positive. Appetite for M&A deals remains strong, capacity is going up and we are beginning to see an increasing number of deals being announced," said Mr. Vishal Sharma, KPMG Head of M&A for the Asia Pacific region. "We see more confidence in the boardroom and companies have stronger balance sheets.
Europe corporations most confident; Singapore shows increasing appetite over past year
Predicted forward price/earnings (P/E) ratios, a measure of appetite of corporate confidence, rose 16 percent over the past year.

Confidence among the largest European companies remains resilient. Predicted forward P/E ratios have risen 24 percent year-over-year, the joint highest of any region.

At the other end of the spectrum, forward P/E expectations for Japan fell 11 percent between January and June of 2014, reversing most of the gains made between June and December 2013.

For Southeast Asia, Vietnam showed the highest increase in confidence levels at 44 percent.
Sector confidence remains high
The high level of M&A appetite is apparent across most industries, with predicted forward P/E ratios remaining higher over the past year.

The strongest expectations were for Telecoms, Technology, and Basic Materials.
Increased capacity expected over the next year
The increase in appetite is matched by an anticipated increase of capacity – indicated by the net debt to earnings before interest, tax, depreciation and amortization (EBITDA) ratio – of 13 percent over the next year.

This means that corporates are continuing to pay down debt and have an increasing amount of cash with which to fund deals.

Africa and the Middle East is expected to have the largest increase in capacity over the next year at 24 percent, while the Asia Pacific region excluding Japan comes next at 21 percent.

Singapore is expected to see a 10 percent increase in capacity over the next year, Malaysia (31 percent), Indonesia (47 percent) and Vietnam (27 percent).
KPMG INSIGHTS
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