November 5, 2015

M&A Forecast: Optimism Wanes

A look at Dykema’s “11th Annual M&A Outlook Survey” shows:

– Just 37% of respondents said they believed M&A activity would strengthen in the next 12 months – down from 59% of respondents in last year’s survey. 20% said they expect the market to weaken, compared with just 9% of respondents last year. Meanwhile, fewer than half (48%) of respondents were bullish about the U.S. economy overall for the next 12 months, compared with 62% in 2014.
– 52% said that strategic buyers most influenced U.S. deal valuation over the past 12 months, up from 42% in 2014. When asked why, some respondents noted availability of cash and financing for buyers seeking synergistic transactions.
– Although just 48% of respondents said they had a positive outlook on the U.S. economy over the next 12 months, the percentage was still higher than the results in all but three years since the question was first asked in the survey in 2005.
– Similarly, just 38% of respondents said they expect the U.S. economy to improve in the next 12 months, down from more than half who picked that choice in 2013 and 2014 but higher than the results in 2011 and 2012.
– Health care and technology were the top two sectors respondents picked for the most M&A activity in the next year, followed by energy, industrial/manufacturing and automotive. These rankings were similar to the 2014 findings.
– A stronger economy was the top choice given by respondents when asked to pick the factor that would most positively impact financial services M&A in the next 12 months. A weaker economy was cited as the top negative factor in the market.
– Of the 72% of respondents who expect an increase in M&A activity involving privately owned businesses, the most common explanation was concerns about aging business owners, as those owners may think valuations of their businesses are reaching top levels.