Mergers and acquisitions are an effective mechanism for doing business and are firmly established in the American practice of company development.
The prospects of M&A deals
The phenomenon of mergers and acquisitions (M&A) arose long ago in the United States, however, at the European level, this phenomenon is relatively new, mainly representing a strategic dimension. The emergence and generalization of waves of mergers and acquisitions in European countries according to the American model emphasize the need to see this phenomenon for a longer time. M&A most often occurs in waves that mainly affect certain sectors of activity, depending on the development of a particular industry.
The processes of merging enterprises within sectors and at the inter-sectoral level occur constantly and fairly objectively reflect the change in the economic situation in the sectors of the economy and their investment attractiveness. The combination of two or more large market participants leads to a change in the distribution of sales volumes between participants, therefore, to a change in the distribution of market power.
The efficiency of M&A is significantly influenced by the development of modern business processes, primarily digital transformation. In modern conditions, there is a shift in emphasis on digital transformation as a driving force and one of the main factors in the development of the M&A market. As a result, Virtual Data Rooms are used for safe data storing, accessing information, and simplifying M&A deals.
TOP-5 American M&As industries
The trend towards an increase in the share of large-scale transactions aimed at entering corporations into fast-growing markets and gaining new opportunities continued throughout the wave until 2020, when large-scale transactions increased the share of volume to 56% of all large transactions, up from 41% in 2015. The picture varies greatly from industry to industry, with health, technology, and consumer products excelling in the largest number of large deals.
Despite the uncertainty of 2020, the increasing scale of transactions is fueled by the conclusion of mega-deals. Using new digital technologies, like Virtual Data Room has prompted large pharmaceutical companies to reorient towards creating value through innovation.
Large-scale M&A deals also continue to be relevant, especially in industries in which the pandemic has contributed to the disruption of their business models. The media and retail industries will continue to experience more consolidation as scale becomes more necessary to compete and outstrip innovative companies. In banking and telecommunications, consolidation is also encouraged by government support.
The most common M&As industries in the USA include:
- private equity and venture capital,
- financial services,
- manufactured goods,
- consumer goods,
- retail and healthcare.
Let`s take a closer look at the following spheres:
- The healthcare industry remains an attractive industry for investors and active deal-making is expected to continue. The medical devices, vaccine manufacturing, diagnostics associated with pandemic response are expected to continue to be attractive value creation and targets for new acquisitions;
- In the energy sector, M&A activity is likely to increase as early as 2021, while oil prices remain stable. Consolidations of oil companies such as Chevron and Noble Energy, Cenovus Energy, and Husky Energy Inc., announced in the second half of 2020, will continue to generate economies of scale, especially in North America;
- The consumer goods market as well as retail goods have shown resilience throughout 2020 and remain focused on strategies to create value for the future. Over the past six months, the trend of ethical consumption has influenced the spread of vegetarianism, which has led to an increase in the activity of mergers and acquisitions of sustainable companies aimed at changing the principles of consumption.