Global M&A deals to pick up momentum: KPMG

The global merger and acquisition (M&A) market is set to revive this year with the corporates' appetite for deal-making is slowly but steadily increasing, says a study by the global consultancy firm KPMG.

According to the KPMG International's Global M&A Predictor, the global M&A market is set for growth after significant revisions in the last year.

"The latest Predictor numbers point to a slow but assured improvement in the global deals market over the next 12 months even though credit markets remain tight," says the report. Mirroring the trend in the global M&A space, India is also witnessing a j ump in the quality and quantum of conversations around potential transactions, says the KPMG report.

"There is guarded optimism in the boardrooms on inorganic growth initiatives and during the year we expect this to manifest into a healthier level of transactional activities," KPMG India Head (Corporate Finance) Rohit Kapur said.

Moreover, the domestic private equity space seems to have become active again, indicating deals will substantially increase this year. "We are already starting to see a high volume of deal flow.

However, recovery of our equity markets means private equity firms will continue to have concerns on valuation expectations and will face significant competition from public markets," KPMG Head (Private Equity Advisory) Vikram Utamsingh said.

The KPMG study, which sought to track and establish the potential direction of M&A activity, was conducted across the world's 1,000 largest firms in terms of market capitalisation.

The study tracked the 12-month forward price to earnings (PE) multiples and estimated net debt to earnings before interest, tax, depreciation and amortization (EBITDA) ratios.

The KPMG report stated that looking at the regional numbers within, all of geographical regions exhibit the 'preferred' combination of improving PE ratios (increasing appetite) and declining net debt ratios (increasing capacity).

Latin America shows the highest increases in the PE ratios, moving up 62 per cent and is followed by Asia Pacific (excluding Japan) at 35 per cent, Africa and the Middle East at 13 per cent, Europe and North America at 7 per cent and 4 per cent, respectively, the study revealed.