Brunswick: 'Le Bon Temps Rouler' for M&A

Confidence among CEOs and boards, economic optimism and plenty of cheap money are key factors driving record expectations in the M&A realm, according to a survey by Brunswick Group.

"If the deal community is right, it is le bon temps rouler for the deal business," said Brunswick senior partner Steve Lipin.

In North America, consumer goods are expected by advisors to be the ripest for consolidation, followed by technology, telecommunications and energy.

Berkshire Hathaway and 3G Capital’s $23B deal for Heinz announced in February, coupled with the American Airlines-US Airways merger and a revamped $20B pursuit of Grupo Modelo by A-B InBev are key signs of a rebound in M&A activity.

Brunswick found that healthcare has dropped out of the top three sectors viewed as active for deals, slipping from 21% last year to only 14% in 2013. Large deals for Virgin Media and Dell are also in the works.

While M&A overall is forecast to rise, nearly 90% of North American advisors expect leveraged buyouts to rise as well. Low-cost debt fuels expectations for an increase in all-cash deals (forecast to be 69%), followed by cash-and-stock (27%) and all-stock deals (5%). Acquires are seen to be private equity firms (49%), strategic buyers (32%), hedge funds (17%) and management (2%). [Read the full Brunswick survey - PDF]

Domestic U.S. deals are expected to make up most of the M&A activity here, with China seen by 61% as the top source of inbound transactions. Latin America spiked from 4% last year to 11% this year on the radar of North American advisors.

The firm, which polled M&A advisors in North America, Greater China and Europe, found North America to be the most bullish on deal-making as 97% of advisors in that region said they expect an uptick over 2012. That compares with 67% in China and 61% in Europe.

While board/CEO confidence, economic improvements and cheap debt are the top factors fueling North American M&A optimism, shareholder activism and pressure from investors surged as a factor from 2012-13, according to Brunswick’s survey. Last year it was cited by 28% as a factor driving M&A, while it hit 44% in this year’s survey.