6 Sectors Ripe for Business Consolidation in 2014
Since hitting a low during the recession, merger-and-acquisition activity is picking up again as corporations look outside their walls to expand.

2014 promises to be a big year for mergers and acquisitions, with the value of deals worldwide hitting $2.4 trillion, $982 billion in the U.S. alone. Though still well below prerecession peaks, that’s a solid 10% increase from 2013 in both cases.
One reason for the increase is the abundant financial resources available to businesses. Start with the $1.93 trillion in cash that corporations are sitting on. Add to that the buoyant stock markets, strong profit growth and low interest rates. All help provide the wherewithal to grow.
A second reason we expect to see more M&A activity this year is the brisker economic tempo, promising good returns to businesses that expand. “The intensity of merger activity and the health of the economy go hand in hand; if the economy is stable or growing, then M&A activity is going to be stable or growing, too,” says Amanda Levin, editor of Mergermarket in New York. “I think that companies feel more confident about the economy’s potential, and as long as that continues we’ll see a pickup in activity.”
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Budget détente in Washington helps, too. After many months of disruptive partisan warfare, the current quiet is soothing corporate executives’ worries about fiscal cutbacks.
For smaller firms, demographics play a role as well. Baby boomer business owners are reaching the stage when they want to cash out and retire. Selling to a larger firm offers them a convenient exit strategy. “This is the middle market, generally businesses valued at $1 billion or less, many of them family owned and less affected by things like government shutdowns that may influence bigger companies’ decisions,” Levin notes. “So when it is time for them to sell, because of age or a wish to pass on the business or whatever, they sell.”
Among sectors ripe for consolidation:
Technology. Deep-pocketed, mature firms will aim to position themselves for future growth by acquiring the latest innovations through takeovers. Start-ups in California’s Silicon Valley, Austin, Texas, Boston and elsewhere are more likely to find eager suitors than in some past years.
Energy. With the U.S. poised to become a net exporter of oil by 2020 and decades of natural gas supplies available to be tapped, oil and gas exploration and development are fertile ground for M&A activity. Smaller operators in the oil and gas boom are well positioned to cash in while their bigger brethren seek economies of scale. Also likely to see consolidation: Utilities plus power generation and mining firms.
Media and communications. Sirius XM Holdings, for example, is being courted by majority owner Liberty Media. Also lots of activity among cable firms, beefing up to better compete with giant Comcast. Charter Communications’ aggressive wooing of Time Warner Cable has already spurred a $61-billion proposal -- and gotten a no.
Health care providers, driven partly by Obamacare. To maintain revenues, some providers will expand by taking over others -- especially smaller independents -- that see a sale or partnership as better than sticking out a tougher environment alone.
Pharmaceuticals. Powerhouses, such as Bristol-Myers Squibb and Merck, will be on the prowl, seeking access to promising cancer, antiviral and specialty drugs. And, driven partly by expiring patents on some of their well-known profit generators, they’ll likely try to position themselves to compete better with generic medicines.
And retail, especially bricks-and-mortar firms, as online competitors continue to strip away sales. Firms, such as American Eagle Outfitters, with not much debt, strong cash generation and good brand recognition are likely to be attractive targets.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

-
Dow Adds 238 Points as UnitedHealth, Caterpillar Pop: Stock Market Today
The lack of a September jobs report didn't seem to worry market participants, with the data delayed due to the ongoing government shutdown.
-
Kiplinger Quiz of the Week: Test Yourself on the Week's Stories
Quiz The Nike stock price, Amazon's settlement and the shutdown were all covered by Kiplinger this week — but why? How much do you know about the week's financial news?
-
Apple Readies for AI Upgrade with New iPhones
The Kiplinger Letter The tech giant has stumbled when it comes to artificial intelligence, but a new batch of iPhones will help it make headway.
-
Japan Enters a New Era of Risk and Reform
The Kiplinger Letter Japan has entered a pivotal moment in its economic history, undertaking ambitious policy and structural reforms to escape from decades of stagnation.
-
How Consumers Are Tinkering with Cutting-Edge AI
The Kiplinger Letter Companies launching artificial intelligence tools are jostling for consumer attention. Some products are already building a deep connection with users.
-
After Years of Stagnant Growth, Hope Emerges for EU Economy
The Kiplinger Letter Can a German fiscal push outweigh French political peril?
-
Small Businesses Are Racing to Use AI
The Kiplinger Letter Spurred on by competitive pressures, small businesses are racing to adopt AI. A recent snapshot shows the technology’s day-to-day uses.
-
How AI Puts Company Data at Risk
The Kiplinger Letter Cybersecurity professionals are racing to ward off AI threats while also using AI tools to shore up defenses.
-
AI Start-ups Are Rolling in Cash
The Kiplinger Letter Investors are plowing record sums of money into artificial intelligence start-ups. Even as sales grow swiftly, losses are piling up for AI firms.
-
What is AI Worth to the Economy?
The Letter Spending on AI is already boosting GDP, but will the massive outlays being poured into the technology deliver faster economic growth in the long run?