3 | The Deloitte M&A Index Q4 2014 Factors set to influence M&A in 2015 Leveraged loans driving M&A Figure 4. Acquisition-related loan volumes in the US (January to October In recent years there has been a boom in the 2007–2014) syndicated loan market. Data from Dealogic 100% shows that leveraged loans, which make up 37 per cent of total syndicated global loans, 80% stood at $1.35 trillion in 2014. Companies are increasingly using leveraged loans to 60% fund M&A activities. As of October 2014, acquisition related loan volumes in the US 40% reached $206 billion, the highest since 2007. 20% In addition the search for yield is driving alternative investors such as hedge funds and 0% specialist asset managers to provide lending 2007 2008 2009 2010 2011 2012 2013 YTD for mid-market companies. The Deloitte 2014 Alternative Lending Tracker estimates that in % Leveraged % Investment grade Europe a large proportion of the financing Source: Dealogic is being used for M&A or LBO purposes. We expect this trend to continue in the coming year and provide a steady rise in both main and mid-market M&A activities. Corporate cash still plentiful Figure 5. S&P Global 1200 corporate cash and spending patterns Deloitte estimates that one thousand largest ($bn), 2000 to H1 2014 non-financial companies in the world 900 3,500 have around $3.1 trillion in cash reserves 800 3,000 as of H1 2014, close to record highs. 700 2,500 These companies have been returning cash 600 500 2,000 to shareholders through dividends and share 400 1,500 buy-backs. In H1 2014, companies returned 300 1,000 200 $600 billion, the highest six-monthly amount 100 500 in well over a decade. Much of this has 0H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 0 been financed through debt which grew 2000 2001 2003 2004 2006 2007 2009 2010 2012 2013 by 21 per cent from $7 trillion in 2008 to $8.5 trillion in 2014. Cash reserves (RHS) Capex (LHS) M&A spend (LHS) Dividends (LHS) Buyback (LHS) The S&P Global 1200 Index reached record Source: Bloomberg; Deloitte analysis highs in 2014, however the annual revenue growth for these companies fell for two consecutive years. We expect investors to put the spotlight back on revenue growth and companies to start spending on M&A and capex to boost their growth prospects.