Market-Minded Firms Dominate Buying

The slump in m&a activity has proved an opportune time for major purchases by companies anxious to improve market position or stake out new markets, according to KPMG International. In its latest biennial survey of transaction trends, the international accounting firm found that nearly three-quarters of buyers executing large transactions in 2000 and 2001 keyed their dealmaking to conditions in their product and service markets. The proportion of market-based dealmaking expanded from roughly two-thirds of the total that KPMG reported in the 2001 survey, which covered a much more brisk period of deal flows. According to the latest report, which included a sample of 122 companies that completed major transactions, 31% bought to increase or protect market share and 26% used acquisitions to enter new product or geographical markets. Another 15% was interested in leveraging acquisitions for diversification. The total of market-based deals was 72% compared with 63% in the 2001 survey. However, a breakdown of the total showed that the biggest increase was in the share of deals designed to increase or protect market share. The same proportion in the 2001 survey was 25%. Gains in the other two components were much more modest, with the 2001 returns at 25% for hitting new markets and 13% for diversification. These data suggest that those companies that had the financial muscle and were willing to weather economic turbulence were able to sew up advantageous deals at a time when pricing was slipping in the deals market. Copyright 2003 Thomson Media Inc. All Rights Reserved. http://www.thomsonmedia.com http://www.majournal.com