Citizens survey: Businesses expect lots of M&A activity this year

MERGER AND ACQUISITION ACTIVITY is expected to continue at a rapid-fire pace this year, with the number and value of mergers and acquisitions expected to grow, according to a new survey from Citizens Financial Group Inc. published on Thursday. / PBN FILE PHOTO

PROVIDENCE – The red-hot deal market hasn’t reached its boiling point yet, with mergers and acquisition activity expected to heat up even more in the year ahead, according to a new survey from Citizens Financial Group Inc. published on Thursday. 

The Citizens 2022 Mergers & Acquisitions Outlook reflects results of 400 C-suite executives at middle-market companies and private equity firms with $50 million to $1 billion in revenue.

Among the drivers of a strong M&A outlook for the year ahead: more companies looking to sell – either as a growth strategy or because they don’t have a succession plan, the survey found. While interest from prospective buyers was strong in 2021, selling activity has rebounded after being on the decline for the last two years. Nearly 4 in 10 prospective sellers are looking to put up their entire business in the year ahead, up from about a quarter in 2021.

That’s true in Rhode Island, where Citizens business clients are eager for mergers and acquisitions – both as buyers and sellers, said Keith Kelly, the company’s Rhode Island president. 

- Advertisement -

On the buyer side, companies see closing deals as the best way to grow amid economic hardships, including labor market shortages and inflation. Six in 10 businesses surveyed said the majority of their growth would come through acquisitions this year, and they expect to have more compelling opportunities due to higher volume of sellers.

“It speaks volumes that companies and PE firms see this pace continuing,” said Jim Childs, head of Citizens M&A Advisory, in a statement. “It reflects the confidence level in the market. The pandemic really disrupted the operating environment, and that creates a new value proposition for both sellers and buyers.”

And the Zoom-ified world ushered in by COVID-19 means prospective buyers aren’t limited by geography. Kelly said local clients are considering deals that would bring them across the country, seeing the geographic expansion as an opportunity to widen their reach and potentially find new workers.

Beyond the country’s borders might be too far though. Interest in international deals has fallen among buyers and sellers, according to the survey, though more private equity firms expressed interest in international opportunities.

Whether at home or abroad, the cost of closing those deals won’t be cheap, with a majority of middle-market companies and private equity firms expecting company valuations to remain stable or increase in the year ahead due to low interest rates and strong economic growth.

Confidence in closing prospective deals has also increased among both buyers and sellers, in part a reflection of continued interest in professional advisory services for M&A transactions. Two-thirds of buyers said they would prefer to work with a seller who uses an adviser, with 42% believing that will keep negotiations professional even in a high-stress environment.

“They can be a very traumatic experience,” Kelly said of business deals. “Having that professional that focuses specifically on the buy side or the sell side provides a lot of comfort.”

To that end, Citizens has continued to grow its own M&A Advisory services with several deals to buy investment and capital markets firms recently closed or upcoming in the year ahead. Already, it’s reaping the benefits of strong merger and acquisition activity, reporting record fourth-quarter capital market fee income in its Wednesday earnings report.

Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.

No posts to display