M&A activity in the US continued to pick up pace in the first half of 2011 and is expected to pick up steadily during the second half of the year, according to the PwC US Mid-Year M&A Outlook 2011. The PwC report reviewed the last 12 months, and insights I took from it aligned well with a recent analysis by Firmex that reviewed the last 24 months of Data room usage and 2011 M&A trends. Our report showed a 43% growth in data room usage by M&A advisory firms, which is a good leading indicator for future M&A deals over the next six months.
PricewaterhouseCoopers reported that in first five months of 2011 there was a 39% increase in deal value over the same period last year, with the 1,276 deals that were announced worth a total of $454 billion, versus deal value of $327 billion last year. Deal volume declined by 4 percent from the 1,336 deals in the first five months of 2010, which PwC partly attributed to the lag time in reporting transactions.
Martyn Curragh, US Transaction Services Leader with PwC said he expects that deal size will continue to increase over the next 12 months, given that the report showed that the average deal size increased to $356 million in the first five months of 2011, up 45 percent from $245 million last year.
Our clients have told us of the moves by corporates who are using their strong cash positions and stock prices as currency to make acquisitions, and their expectations that corporations will continue to dominate the M&A landscape this year. Factset reported that the available cash on S&P 500 company balance sheets currently exceeds $1.1 trillion, and according to PwC report, corporates have accounted for 82 percent of deal volume and 84 percent of deal value in 2011. The dominance of corporations, is likely the result of the disciplined cost cutting and restructuring that many corporations undertook during the recent downturn.
Thanks to stronger capital markets, more available financing and the large cash piles held by corporates and private equity houses, we can anticipate that businesses will pursue a sustainable level of growth that will lead to more stable markets in 2011.