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Expectations for U.S. M&A activity in 2020 have nosedived from those that prevailed late last year looking ahead to 2019, according to the latest annual study by the law firm Dykema Gossett.
After the 12-month outlook barely wavered for three straight years, from 2015-2017, optimism soared in 2018. Heading into last year, 65% of surveyed senior executives and advisers expressed a positive outlook for M&A, and only 15% had a negative outlook.
What a difference a year makes. In the new survey, only a third (33%) of the 200 respondents anticipated a positive M&A market in 2020, barely topping the 32% with negative expectations.
The results weren’t much of a surprise, owing to the softer M&A market that ultimately has prevailed for most of 2019 after strong deal activity in the first quarter.
Still, Dykema pointed out, 2019’s overall M&A volume has been relatively strong, and a plurality (36%) of survey respondents said the U.S. market will see no significant change in the next 12 months.
But a change of sentiment is clearly in the air. For the first time in six years, availability of capital was not the factor most often cited for fueling M&A activity. This year, general U.S. economic conditions led the list, with 33% of survey takers pointing to it as the biggest driver, well ahead of capital availability (24%).
“The change in M&A drivers suggests that some companies are making deals to cope with slow organic growth, [and] others are hurrying to make deals before a downturn … and expect downgraded valuations in the coming year,” Dykema wrote.
