As the US economy enters year five of the mega-merger era, the outlook for global merger activity remains strong. Yet concerns about the impact of high interest rates, problems with financing, and the Three Es (equity markets, the Euro and energy costs) are mounting, according to the year-end M&A forecast by PricewaterhouseCoopers' Transaction Services group.
The biggest change, the group says, is the need to integrate acquisition strategies into the growth model of the new economy - which rewards ownership of intangible assets like brands - and penalizes companies that rely on hard assets to provide earnings.
Bob Filek, a partner in the Transaction Services group, says, "This is clearly a transition point in the global mergers and acquisitions marketplace. While there's no reason to believe that mega-mergers will fade away any time soon, it is clear that the rationale for the size-for-size's-sake deal is eroding quickly. When you cut away the rhetoric," Filek adds, growth is what drives the acquisition process. In a slowing economy, the only sure path to growth is through the acquisition of new customers. And that's what we're going to see a lot of companies trying to do in 2001. If financing sources loosen up and we see some strength in the Euro we could see another record year."
The following factors will impact buying and selling decisions in 2001:
- Credit earnings, as well as growth.
- The lowering of gross margins.
- The impact of the e-commerce exchange.
- Loyalty to customers.
- Restructuring of old economy models.
- European companies entering the US market.
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