Last year turned out to be another strong year for M&A activity in the U.S. Among mid-market leaders the prevailing sense is that the backdrop for 2020 is favorable, but the urgency to get deals done has ticked downward. We saw nuances in this year’s outlook which suggest that the year ahead could be one of comparative restraint for M&A deals:
- Concerns about any near-term economic pullback have abated
- Organic growth prospects have improved
- Sellers and buyers appear to be more focused on carve-outs and bolt-ons
- Sellers are less bullish about valuations and less confident about getting deals done
- The pool of sellers may be shrinking
What is the current state of the M&A market?
Broad Economic Strength Is Expected
The press may talk of an impending economic slowdown, but mid-market leaders do not appear to be convinced
2020 Performance Expectation
No Single Risk Is of Primary Concern
- 19%Interest rates
- 17%Tax policy changes
- 16%Regulatory environment
- 16%Labor market
Hiring Will Continue
34%Increase hiring
43%Remain the same
21%Decrease hiring
Organic Growth Opportunities Tick Upward
With a solid economic outlook, businesses expect to grow more through organic strategies than through acquisitions
Expected Sources of Growth
Fewer Sellers and Buyers Are Looking Abroad for M&A Opportunities
Consider an international sale?
Consider an international purchase?
Fewer Firms Are Looking to Sell or Buy the Entire Business
Sell the entire business?
Buy the entire business?
Continued Valuation Strength Is Anticipated
Valuations remained strong through 2019, and mid-market leaders are expecting more of the same for 2020
2020 Company Valuations
What is the current state of corporate valuations?
Sellers are Tempering Their Expectations
While Buyers Remain Confident
Still a Sellers’ Market, but Fewer in the Queue
In an environment of high valuations, it might seem surprising that the sellers’ pool has shrunk
Lowest Percentage of Seller Activity in 4 Years
Just under half of mid-market leaders are considering selling in 2020—18% fewer than a year ago
How do sellers view the M&A market?
Buyers Continue to Wait Patiently on the Sidelines
Just over half of mid-market leaders are considering buying in 2020—16% fewer than a year ago
How do buyers view the M&A market?
Mid-market Leaders Who Experienced a Decrease in Deal Solicitations
The Value of the Advisor Remains Steady
The majority of sellers and buyers indicate they are likely to hire an advisor if they engage in M&A activity this year
Seller Rationale
Buyer Rationale
Ready for M&A Advisors Who Think Like Owners?
Ralph M. Della Ratta
Co-Head of M&A Advisory
Citizens Capital Markets
Download the 4-page summary highlighting key findings from the survey.
About Citizens Capital Markets
Citizens Capital Markets provides highly customized financial advisory solutions to leading middle market companies across a focused set of industries. Clients within industrial, business services, consumer, healthcare, technology and transportation verticals benefit from our tailored approach to mergers and acquisitions, capital raising, financial restructuring, financial opinions and other valuation services.
As a part of Citizens Financial Group, Citizens Capital Markets is able to leverage the strength of one of the oldest and largest financial institutions in the U.S. to accelerate the delivery of valuable ideas and execution capabilities beyond what a traditional M&A advisory firm can do.
Methodology
The survey was conducted among U.S.-based middle market businesses ($50MM to $3B in revenue) that are currently engaged in or open to mergers and acquisitions activity. Core sectors included healthcare, technology, industrial, consumer services, B2B services, transportation and other industries.
528 business executives directly involved in decision-making related to mergers and acquisitions (Owners/Partners, CEOs, Presidents and other C-level and Directors) completed a 15-minute phone or web-based survey between November 14, 2019 - December 6, 2019.
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