Survey: Dealmakers Expect Increased M&A Activity

A few months back, I asked you to participate in our bi-annual Dealmakers Survey, which is done in conjunction with the Association for Corporate Growth (ACG). We got over 680 responses, including GPs, bankers, lenders and LPs.

The top-line results reflect increased optimism, which 85% of respondents expecting an increase in M&A activity over the next six months. They also said it’s a buyer’s market. For context, only 56% predicted increased M&A activity in the year-ago survey.

Respondents said that healthcare and manufacturing/distribution would experience the most activity with 20% each, followed by financial services (13%) and technology (12%). Digging a bit deeper, business services is considered the sector with the best opportunities for future buyouts, while manufacturing/distribution will be best for distressed.

A whopping 79% of respondents said they expect to pay 5x EBITDA or less for companies over the next six months. They also said that 30% of their portfolio companies are expected to experience job growth, with 7% to experience job cuts.

One confusing result is related to portfolio company valuations. Thirty-five percent of respondents said they have marked down portfolio values over the past 12 months, while 22% had marked them up. That seems odd not only due to how fair-market accounting should interact with rising public markets, but also because 74% of respondent portfolio companies have improved EBITDA in the past year. Really not sure what to make of all that…

Finally, most respondents expect continued credit market improvement. Maximum leverage levels in today’s environment was reported by most at between 2x-3x.