As we have reviewed in past posts, most M&A professionals are quite bullish on M&A activity over the next 12 months.
This was recently confirmed by our friends at Dykema (a leading national law firm, serving business entities worldwide on a wide range of complex business issues), who recently released their annual M&A Outlook Survey.
In the midst of the COVID-19 pandemic and just a year after tempering expectations for deal-making, respondents to Dykema’s 16th Annual M&A Outlook Survey are the most optimistic they have been in the 16-year history of the survey.
Seventy-one percent of respondents expect the M&A market to strengthen over the next 12 months, up from 33 percent in 2019, and 87 percent believe M&A activity will increase in the same timeframe. The rise in optimism reflects market conditions and a belief from respondents that the worst is behind them – with both financial and strategic buyers seeing opportunity in a hobbled economy. Further, 60 percent of respondents say their outlook for the U.S. economy is positive over the next 12 months.
Lest you think that this is a small sample size to base these conclusions on, here is the method Dykema uses:
We canvass senior executives—CEOs, CFOs and other professionals involved in M&A activities with their respective companies and firms—to gauge their insights and perspectives on the mergers and acquisitions market in the coming 12 months. The results provide a snapshot of the M&A market and the economy this year and how they compare from previous years.
Over the years, we have seen the results of their annual surveys come to fruition more often than not. And based on our projected buyer activity, with our NDAs up over 45% from last year at this time, we expect 2021 to be a prime time to exit if you are the owner of a privately held company today.
NOTE: NDAs (non-disclosure agreements) are a leading forecaster of M&A activity, as a signed NDA is a good indicator that a deal will eventually close.
“Despite COVID-19 and current economic uncertainties, dealmakers see increasing opportunities for completing deals in the next 12 months,” said Thomas Vaughn, co-leader of Dykema’s Mergers & Acquisitions practice.
“The pandemic will continue to influence the deal market over the coming year, but there is a surprising level of optimism among deal-makers that its impact on M&A will wane over time. With 72% of dealmakers expecting to close a deal in the next year, whether you’re a strategic or financial-focused buyer or a seller hoping to cash out, there are opportunities in the M&A market for the right deal.”
And again, we concur with Dykema's findings; in fact, we have closed more deals in the past six months than during any six-month period in our history, and are expecting another record deal making year for our clients by the end of 2020 and going into 2021.
But now is the time for you to act.
Keep in mind that it takes 9+ months on average to close most transactions once the owner makes the decision to move forward. That means the fourth quarter of 2020 is a PRIME time to engage with Generational and begin your exit journey.
Even if your timeframe is well beyond 2021, keep in mind that there are intentional ways to grow a business that enhance value and, unfortunately, there are also ways to grow a business that actually negatively impact its value. Knowing the difference is critical for your long-term financial health and success.
To see how Generational and its family of companies can help you understand how to optimize your exit journey, please call us at 972-232-1121 or visit our website, leave us your contact information, and we will be in touch.
Special thanks to Dykema for once again doing such a thorough analysis of the pending M&A boom. You can download a copy of their entire report here:
Carl Doerksen is the Director of Corporate Development at Generational Equity.
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