November 4, 2019

M&A Outlook: Execs Optimistic About 2020, Despite Economic Jitters

EY recently published the latest edition of its “Global Capital Confidence Barometer”, which surveyed more than 2,900 executives in 45 countries about a variety of macroeconomic & business topics, including their thoughts on the climate for M&A in the upcoming year. Here are some of the highlights:

– 68% of executives surveyed believe the global M&A market will improve over the next 12 months, 26% believe it will remain the same, while only 6% expect a decline.

– 52% expect their companies to be active participants in the M&A market during the upcoming year.

– 94% expect their deal pipeline to increase (49%) or remain the same (45%), and the same percentage expect to do the same (45%) or a greater number (49%) of deals during next 12 months.

The survey notes that one of the reasons for continued optimism is that companies can’t transform their portfolios as quickly as they need to without M&A. What’s more, it isn’t only the buy side that’s driving activity – companies are using divestments to find the capital they need for new acqusitions. When you add in the record levels of dry power in private capital, EY says that “all the components of sustained momentum remain in place.”

When it comes to the U.S., EY reports that executives are even more optimistic – with 83% expecting that the market will improve. But this Pitchbook article identifies a potential yellow light:

But there’s another side to the story: deal intentions slipped below the 50% mark for the first time in two years, with just 46% of US respondents saying they intend to actively pursue M&A in the next 12 months. Yet, given market conditions—56% of US executives deem regulatory impacts as their greatest external business threat—that’s still “pretty incredible,” according to Bill Casey, EY Americas Vice Chair of Transaction Advisory Services.

Overall, the survey suggests that we should look for another robust year when it comes to M&A activity, despite concerns about recession, trade wars, impeachment & the U.S. election – if for no other reason than that, in the current environment, businesses don’t seem to have viable alternatives to provide the growth that investors demand.

John Jenkins