The number of mid-sized US companies already engaged in or open to buying and selling has risen sharply since last year, setting the stage for a very active 2017 merger market, according to the sixth annual Citizens Commercial Banking Middle Market M&A Outlook.
The survey of 600 business leaders shows a significant increase in the level of interest among both buyers and sellers compared to 2016.
“It’s looking like 2017 is going to be an active year for M&A, with our survey showing a significant increase in the number of companies interested in selling,” says Bob Rubino, executive vice president and head of corporate finance and capital markets at Citizens Commercial Banking. “We’re seeing more owner fatigue or concern about the future in companies coupled with a buyer pool that is hungry for acquisitions.
“We’re also closely watching the impact on markets of the US election, which survey respondents had downplayed as a potential issue, but which may have unexpected consequences. In the short term, I think potential buyers and sellers are in a wait-and-see period as the election has been followed by a run-up in valuations and confidence.”
The Citizens study examines the annual appetite for mergers and acquisitions among middle market companies – companies with annual revenue between USD5 million and USD2 billion – that are key creators of jobs and drivers of economic activity in the US.
This year’s survey suggests that sellers are looking to get off the fence with 53 per cent either currently involved in or open to considering a deal, compared to 34 per cent last year. Demand from buyers is also increasing with 73 per cent currently involved in or open to considering deals, up from 60 per cent last year.
“We’re seeing sellers looking for exits and an uptick in buyers seeking growth,” Rubino says. “This should point to a more robust M&A environment in 2017, though there may be a pause until the impact of the election becomes clearer. Since the election, the potential lowering of capital gains and estate taxes, as well as hints of a less restrictive regulatory environment and future stimulus spending have led to a rise in US equity markets in anticipation of accelerated economic growth. There is a sense among some mid-market decision makers that company valuations may not have peaked just yet and that could affect the M&A environment.”
