NU Online News Service, Feb. 8, 2:18 p.m. EST
Mergers and acquisitions activity should be robust over the next 12 months as a recent survey shows many property and casualty chief financial officers will be looking to acquire a company or block of business, but targets might be hard to come by.
The survey, conducted by Towers Watson, polled 20 P&C CFOs and found 55 percent are considering acquiring a company, and 50 percent are looking to acquire a block of business in the coming year.
The CFOs mostly plan to target growth in the U.S. with their acquisitions (45 percent). Other targets are Asia (15 percent), Canada (10 percent) and Latin America (10 percent
However, targets for acquisitions may be constrained, as just 5 percent of respondents say they might sell a company, and only 15 percent say they are considering selling a block of business over the next 12 months.
Given the possible reality of multiple buyers and few sellers, 35 percent of respondents say they expect to see an increase in bidding wars and hostile takeover activity in the next year.
Towers Watson says, "this forecast could speak to the need for companies to maintain strong cash positions and balance sheets in order to pursue such transactions or fend them off, as the case may be."
The CFOs mentioned other obstacles standing in the way of deals, including economic uncertainty (56 percent) and differing views between the buyer and seller on value and risk (44 percent).
Thirty percent of respondents say they acquired or pursued a company over the last 12 months, and 20 percent say they acquired or pursued a block of business. The primary reason cited for those that considered or completed a transaction is growth via market and product expansion.
Attractive prices and low financing costs may have encouraged acquisitions over the past year, Towers Watson says, but "a deeper examination suggests that respondents are looking at M&As very strategically, with attractive pricing a secondary consideration."
Towers Watson says product positioning, financial performance, the elimination of competitors and global presence are all reasons cited by respondents for completing or considering transactions.
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