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Corporates to stay hungry for M&As as they pare debt: KPMG

STRONG cash balances and the paring of debt should spur more appetite for mergers and acquisitions (M&As) globally, a KPMG study showed on Monday.

The world's largest businesses are expected to show more interest in M&A transactions over the next 12 months, as predicted by forward price-to-earnings ratios. KPMG sees the ratio as a measure of corporate appetite or confidence.

The ability of corporates to fund M&A growth is expected to rise by 13 per cent over the same period, measured by net debt-to-Ebitda (earnings before interest, taxes, depreciation and amortisation) ratios, as companies continue to pay down debt and bolster their cash reserves, KPMG said.

Among Singapore-based companies, the audit firm sees an expected 15 per cent increase in the capacity to fund M&A growth.

"Transactional activity is expected to remain relatively strong due to relatively low cost of financing and the hunger for inorganic growth in the current weak economy," said Benjamin Ong, head of mergers & acquisitions and capital advisory, KPMG in Singapore.

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"Singapore companies have maintained healthy balance sheets and have the capability to finance M&A activity to boost market share and keep up with competition in the increasingly consolidated marketplace," he said.

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