Total U.S. Merger & Acquisition activity YTD 2015 was at $1 trillion. This is the highest level for a first half since records began in 1980. 2015 is on course to be a record year for M&A, and these are the reasons why:
• Low Interest Rates – U.S. interest rates are very low for now. When interest rates rise, so does the price of capital – leading to lower valuations.
• Cash Availability – Strategic buyers have record levels of cash on hand. Private equity firms are continuing to raise money as well.
• Retiring Business Owners –The Baby Boomers, the largest segment of our nation’s population, have begun preparing for retirement, and the small business marketplace is rapidly becoming flooded with the best businesses that have weathered the recession. Experts predict that the largest transfer of wealth in the nation’s history will soon unfold as these Baby Boomer entrepreneurs retire and cash out of their businesses.
• Economic Growth – While the economic level of growth is slow, it is steady.
• Limited Outside Factors – In the past, the U.S. has experienced many issues, i.e. government shutdowns, budget crises, overseas crises, etc… While there are some overseas concerns, all signs point to a strong market.
• Better Valuations – Companies are receiving better valuations than ever before. They are at the highest level since 2007. Due to the steadying economy, there are more buyers than ever before.