PROVIDENCE – Middle-market companies have fueled a strong mergers and acquisitions market in recent years and expectations remain high for this year, but many companies see a slowdown on the horizon, according to Providence-based Citizens Bank’s 2019 Mergers & Acquisitions Outlook.
The recently released survey of 600 companies nationwide found that as valuations hover at record levels, sellers are coming to market while buyers continue to search for good opportunities. Favorable overall conditions – an expanding economy, a supportive regulatory environment, beneficial corporate tax policies and low interest rates – have fueled an active deal environment, the survey found.
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The survey indicates a strong correlation between economic outlook and mergers and acquisitions activity, with nearly 80 percent of respondents saying a strong economy invigorates their appetite to pursue either a sale or acquisition, depending on their situation. However, respondents are feeling an increased sense of urgency because almost half of companies anticipate an economic slowdown in the next two years.
“Many companies see the economy at a mature point in the cycle, and so both buyers and sellers may begin to accelerate their M&A strategies – a process that can take a year or more – to get ahead of an upcoming slowdown,” said Ralph M. Della Ratta, head of M&A Advisory for Citizens Capital Markets Inc.
“There is reason to believe a slowing economy would support a high level of M&A activity,” Della Ratta said. “Many buyers have retreated from the current market based on premium valuations, and their interest would likely be revived if and when pricing eases. For sellers, a more pronounced slowdown presents a conundrum. Act now, or they could be faced with the reality of putting their exit strategies on hold until market conditions rebound and hoping that company performance holds up in the meantime.”
The survey was fielded in November and December to C-suite executives at U.S. companies with annual revenue from $50 million to $3 billion. To see all of the survey’s key findings, visit www.citizensbank.com/commercial/default.aspx.
Scott Blake is PBN staff writer. Email him at Blake@PBN.com.
