Mergers & Acquisitions: Weighing pros and cons of deal-making

The market for mergers and acquisitions might be heating up, but exclusive research from Retail Leader indicates fewer than half of companies expect to buy or sell a business unit in 2013.

About four out of 10 survey respondents indicated their companies had completed an acquisition in the past 12 months, while about one in four had divested a unit. But few reported acquisitions that had a substantial impact on the company's revenue stream. The majority of respondents said acquisitions made during the past five years accounted for less than 10 percent of company revenue.

When considering an acquisition, executives said the two most important factors in the decision-making process were the purchase price and the cost of developing a new line organically.

The survey also indicates executives are gaining confidence in the economy, with 41 percent reporting a positive view of current business conditions compared with 24 percent a year ago. Further, 57 percent indicated they believe the economy will be stronger in the next six months compared with 42 percent of respondents a year ago.

Q: Do you expect to buy or sell a unit in 2013?
Q: Has the company you work for completed a deal during the past 12 months?
Q: What proportion of your company's revenue stems from acquisitions made in the past five years?
Less than 5 percent
5 to 9 percent
10 to 19 percent
20 to 29 percent
30 to 49 percent
50 percent or more
Q: Which is the most important factor in deciding whether to acquire a company or brand?
Price of acquisition 37.9%
Cost of developing a new line 21.6%
Intellectual property difficult to replicate 16.2%
Cost efficiencies of scale 13.5%
Speed to market 8.1%
Other 2.7%*

*Other mentions include: "The acquired brand must be the market leader."

How would you describe current business conditions?
Where do you expect to see business conditions for the next six months?