November 18, 2019

M&A Outlook: Dealmakers Curb Their Enthusiasm

According to Dykema’s “15th Annual M&A Outlook Survey,” dealmakers aren’t quite as upbeat about the prospects for M&A activity during 2020 as they were last year. Only about 1/3rd of respondents expect the M&A market to strengthen over the next 12 months – that’s down from 65% last year.  Still, only 1/3rd expect a downturn in M&A, so roughly 2/3rds of respondents expect that 2020 will at least equal 2019’s performance.  Here are some of the other highlights:

– Despite trade issues with China, respondents picked that country as the top destination for U.S. outbound M&A activity. A year ago, the country didn’t make the top five, showing the complex nature of U.S./China relations. After China, the top three destinations were Europe, Canada and Japan.

– 33% of respondents said the main driver of U.S. M&A activity in the next 12 months will be general U.S. economic conditions, displacing availability of capital (24%) which had been in the top spot for the past six years.

– 58% of respondents expect an increase in M&A activity involving privately owned businesses in the next 12 months, down from 82% in 2018.

– Financial U.S. buyers, as they were in 2018, are expected to be the biggest influencers on U.S. deal valuations. Respondents believe foreign buyers will have greater influence compared with a year ago, perhaps because the U.S. is still a relatively safe bet compared with other countries.

– Respondents predict the following sectors will see the most M&A activity in the next 12 months: 1) Automotive; 2) Healthcare; 3) Energy; 4) Consumer Products; 5) Technology. Healthcare moved up two spots from 2018.

This survey is a somewhat more pessimistic about M&A activity than the EY survey that I recently blogged about – but even that survey saw some concerns about the pace of M&A activity in the U.S. next year.

John Jenkins