Dealmakers Eye Brighter Future: ACG-Thomson Reuters Survey

Private equity pros, venture capitalists and others in the trade are optimistic that conditions will continue to improve for leveraged buyouts, M&A, and related transactions in the months ahead.

According to the latest installment of the twice-yearly ACG-Thomson Reuters DealMakers Survey, nearly three-quarters of respondents (74%) anticipate a rise in M&A activity over the next six months. One in 10 predicts M&A activity will “increase significantly” from the previous six months, while 64% say it will “increase moderately.”

That respondents see room for improvement is understandable. More than half of them (55%) characterize the current environment for M&A activity as only “fair.” Another 30% call it “good,” 5% “excellent,” 10% “poor.” Interestingly, nearly two-thirds (65%) call it a buyer’s market, and the same percentage believe the market favors strategic over private equity buyers.

Prognostications for the economy hinge on the time frame. Over the next six months, just one in three (31%) predicts an improving economy. However, more than half (54%) predict improvement over the next year. More than three-quarters (77%) see an improving economy over the next 24 months, while just 2% believe the economy will get worse over that time.

All told, the Association for Corporate Growth and Thomson Reuters, publisher of peHub.com, surveyed 473 ACG members and Thomson Reuters customers this October. Service providers accounted for just over a third (34%) of respondents, followed by investment bankers, intermediaries and brokers (26%); corporate professionals and entrepreneurs (17%); lenders and finance providers (12%) and private equity and VC professionals (10%).

A number of questions were directed just to the roughly 50 private equity and venture capital professionals responding to the survey. Some highlights:

• Nearly half (43%) expect the majority of their portfolio companies to add jobs next year; just under a third (31%) said the majority of their portfolio companies have added jobs since January;

• A third (33%) see the best opportunities for buyouts in industrial manufacturing and distribution, while 27% see business services as the most fertile ground;

• More than two-thirds (69%) say uncertainty regarding taxation levels is having no impact on their investment strategy;

• Well over half (59%) believe the debt markets will be “a little better” six months from now, while about a third (35%) believe they’ll be about the same.

• Just over four in 10 (41%) expect to kick in 41% to 50% of equity into their deals over the next six months, on average, while 35% expect the range to be 31% to 40%.