PricewaterhouseCoopers Forecast: M&A Will Remain Strong Through 2006, But Could Peak Thereafter

Cash remains at record levels and economic numbers are good, but some wonder if the market is ready for a breather

NEW YORK, July 13 /PRNewswire/ -- M&A activity remains at a six year high, according to the Transaction Services group of PricewaterhouseCoopers, buoyed by record cash levels at corporations and private equity firms, plentiful financing and historically low levels of troubled commercial debt.
"Companies need to do something with their excess cash," said Bob Filek, a Transaction Services partner. "They've done a good job making their businesses more efficient, and they've got to put that cash to use somewhere. While many have increased their dividends or bought back stock, the favorite use of cash is still strategic investment, much of which is acquisition-related."
"We still have good economic numbers and robust liquidity markets that make it easy to raise debt," said Greg Peterson, Americas leader of the TS private equity practice. Those two factors alone bode well for the continuation of the wave.
What's different in this M&A market, compared with the late '90s, is private equity's increased involvement, particularly on big, complex transactions. As large funds with big overhangs of uninvested capital perfect consortium bidding, they can do deals of virtually any size.
They're using all available tools and structures to get superior returns for investors, minority investments and step acquisitions as well as full buy-outs.