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M&A Outlook for 2012: Be Prepared to Move Fast

Ongoing uncertainty in the global marketplace put a damper on corporate M&A activity toward the end of 2011. Yet one of the biggest tech deals in recent history — the acquisition of National Semiconductor by Texas Instruments — took place this year. The outlook for 2012 remains about the same, according to PricewaterhouseCoopers LLC. The overall pace of M&A will remain lackluster, but companies are prepared to move when an opportunity comes along.

“There will be a greater focus on being able to navigate global market conditions and having more certainty around final deal outcomes,” said Martyn Curragh, US transaction services leader with PwC, in a press release. “We're also continuing to see buyers look towards the emerging markets, such as Brazil and China where local economies are in an upward cycle.”

PwC focuses on acquisitive US companies in its Year-end M&A Outlook. During earnings calls, analysts inevitably ask companies with cash on hand — which include most of the big US tech companies — whether they are planning an acquisition. The inevitable answer: We never rule out buying if the right deal comes along.

Interestingly, PwC said in the press release that the current environment is a seller's market, and that companies with patience are guaranteed to have plenty of suitors:

Sellers are looking for both speed and deal certainty, while simultaneously pursuing various alternative options and scenarios through the full deal timeline to maximize the value of the asset. With sellers in the driver's seat, buyers must remain poised and ready when deal negotiations continue for a prolonged timeframe. Building stronger M&A processes, strategies and capabilities will enable buyers to capitalize on fast-moving deals and monetize new assets quickly after deal close in today's volatile markets.

Curragh put it this way: “Savvy buyers and sellers that thoroughly prepare for and understand every option will be the most successful in executing on growth objectives and deal strategies.”

Technology is one of several sectors that can expect higher-than-usual M&A activity in the coming year, according to PwC:

For more than a decade, M&A volumes in the technology industry have led all other sectors — a trend PwC expects to continue into 2012. PwC sees three broad dynamics driving the increase in deal activity for technology: (1) enterprise vendor consolidation, (2) convergence of computing, communications and entertainment on consumer devices, and (3) the disruptive impact of cloud computing. In addition, high liquidity and generally lower debt positions of the leading technology companies have and will continue to enable them to navigate difficult credit markets in the face of global economic uncertainty. Key sectors to watch for deal activity include storage, mobile devices and social networking.

16 comments on “M&A Outlook for 2012: Be Prepared to Move Fast

  1. Barbara Jorgensen
    December 13, 2011

    I love when timing works…one of the acquisitive companies I am most familiar with is Avnet. The company just announced an acquisition–http://www.avnet.com/prl/home/0,1965,RID%253D0%2526CID%253D66714%2526CCD%253DUSA%2526SID%253D9358%2526DID%253DDF3%2526LID%253D9368%2526PVW%253D%2526BID%253DDF3%2526CTP%253DPRL,00.html–of a company that entered Chapter 11.

  2. AdityaJayaram
    December 13, 2011

    Interesting details from the survvey on m&a in 2012, companies looking at stability in the marketplace will engage in m&a ,just read an informative whitepaper,Opportunistic M&A in emerging markets on due diligence and integration techniques in emerging market M&A @https://bitly.com/u9vb24

  3. AnalyzeThis
    December 13, 2011

    I'm actually surprised we didn't see more M&A activity in Q4. I would have thought a lot of deals would have gotten done before the end of year. Oh well, maybe that's just me…

    And here's a fixed link to what Barbara is talking about below: Avnet, Inc. Announces Agreement to Acquire Assets of Nexicore Services.

  4. Barbara Jorgensen
    December 13, 2011

    Whoops–thanks DQ. My cut-and-paste has run amok…

  5. DataCrunch
    December 13, 2011

    It is interesting to hear that it is a seller’s market, since many of the larger companies are sitting on hoards of cash in a down economy.  

  6. stochastic excursion
    December 14, 2011

    One of the reasons companies may be holding off on acquisitions is volatility in market valuations.  Then again, all the more reason to expect the unexpected in the acquisitions arena.

  7. Daniel
    December 14, 2011

    I think companies are more interested in M&A activities because they can have a better hold of their share of market presents. In most of the cases, its ends up with a monopolistic and unique way of running the business. I mean the competition becomes less and hence reducing the options for customers. From industrial point of view, it is good because they can have a large market share, but for customers they are losing the selection among the providers.

  8. Anand
    December 14, 2011

    Ongoing uncertainty in the global marketplace put a damper on corporate M&A activity toward the end of 2011.

    I feel  this is the best time for M&A activity because company evaluation reach rock bottom during recession because of uncertainity.

  9. Anand
    December 14, 2011

    I mean the competition becomes less and hence reducing the options for customers.

    @Jacob, Although options for customers reduces but its been seen that M&A eventually leads to more custmoer satisfaction. Moreever M&A is necessary for Innovation and best-in-breed technology which will in the end benefits customers.

  10. Barbara Jorgensen
    December 14, 2011

    I would agree with many readers that see this trend as counter-intuitive. Since valuations are so low, it seems like the best time to buy. There is one thing that could expalin why this is a sellers market: companies that are still in business after the Great Recession are stronger than they have ever been. They can bide their time, waiting for a better offer.

  11. mfbertozzi
    December 14, 2011

    It is a fascinating perspective Barbara, in effect corporations still alive, have demonstrated to be very strong, even during current quite long financial recession, started at least one year and half ago. Despite that demonstration, in my opinion several concerns on quality will raise quite soon: corporations, including major players, have reduced investments and cut costs, as consequence, sooner or later, that behaviour will bring impact on production's quality.

  12. itguyphil
    December 14, 2011

    I hope that is the case. We started our tech company during the Great Recession & we're still chugging along. I hope this means we'll be of the stronger subset of companies.

  13. Barbara Jorgensen
    December 15, 2011

    mfb: That's an observation I haven't seen in awhile. One of the things that has been taken for granted in high-tech is the quality of its products. Are these shortcuts companies are taking, or is there really a decline in QC?

  14. Barbara Jorgensen
    December 15, 2011

    pocharle–I hope so too 🙂

  15. bolaji ojo
    December 15, 2011

    Barbara, I wonder what you see happening in the distribution market in 2012. Companies like Arrow and Avnet continue to surprise with M&A moves in the U.S. and Western Europe each time I start thinking they've done all there's to do in these two regions. Is Asia next or do you see more in the West?

  16. Barbara Jorgensen
    December 15, 2011

    Bolaji–Asia is definitely the region US and Europe-based distributors are targeting. The market there continues to be highly frangemnted and frankly, suppliers are happy to see their channel scaled down through M&A. TI talked about it in a recent interview. That said, US-based WESCO just bought US-bsaed RS Components. My guess is this is a strategic buy and the timing was right.

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