The number of mid-sized U.S. companies already engaged in or open to buying and selling has risen sharply since last year, setting the stage for a very active 2017 merger market, according to the sixth annual Citizens Commercial Banking Middle Market M&A Outlook. The survey of 600 business leaders shows a significant increase in the level of interest among both buyers and sellers compared to 2016.
“It’s looking like 2017 is going to be an active year for M&A, with our survey showing a significant increase in the number of companies interested in selling,” said Bob Rubino, executive vice president and head of Corporate Finance and Capital Markets at Citizens Commercial Banking. “We’re seeing more owner fatigue or concern about the future in companies coupled with a buyer pool that is hungry for acquisitions.”
Continued Rubino: “We’re also closely watching the impact on markets of the U.S. election, which survey respondents had downplayed as a potential issue, but which may have unexpected consequences. In the short term, I think potential buyers and sellers are in a wait-and-see period as the election has been followed by a run-up in valuations and confidence.”
The Citizens study examines the annual appetite for mergers and acquisitions among middle market companies – companies with annual revenue between $5 million and $2 billion – that are key creators of jobs and drivers of economic activity in the United States. Citizens Commercial Banking serves thousands of middle market clients in a wide range of industries across the country.
This year’s survey suggests that sellers are looking to get off the fence with 53 percent either currently involved in or open to considering a deal, compared to 34 percent last year. Demand from buyers is also increasing with 73 percent currently involved in or open to considering deals, up from 60 percent last year.
“We’re seeing sellers looking for exits and an uptick in buyers seeking growth,” Rubino said. “This should point to a more robust M&A environment in 2017, though there may be a pause until the impact of the election becomes clearer. Since the election, the potential lowering of capital gains and estate taxes, as well as hints of a less restrictive regulatory environment and future stimulus spending have led to a rise in U.S. equity markets in anticipation of accelerated economic growth. There is a sense among some mid-market decision makers that company valuations may not have peaked just yet and that could affect the M&A environment.”
Citizens Commercial Banking’s Middle Market M&A Outlook provides insight into the behaviors, attitudes and perceptions of business owners and CEOs as they consider their corporate development strategies for the year ahead. Other key findings from this year’s survey include:
Among middle market firms, 21 percent are currently involved in an acquisition and another 52 percent are open to considering one.
Thirty percent of upper middle market potential buyers say they are more confident today than they have been in the past that growth through outside investment is an appropriate strategy with 23 percent confident their company will make an acquisition in the next year.
Top concerns among buyers are inherited liability, integrating corporate cultures and overpaying for an acquisition.
Fifty-eight percent of upper middle market potential sellers fear a significant financial crisis in the next three years, up from 41 percent last year.
Ninety percent of buyers and sellers in the middle market, up about 13 percent, say they need third-party advisors such as commercial bankers for a range of M&A services such as valuation, opportunity assessment, due diligence, strategy and financing.
Citizens aims to be a go-to strategic and financial partner by offering unrivaled industry expertise, great ideas and seamless deal execution. The Citizens Commercial Banking approach puts clients first, and offers solutions that help clients make the best decisions throughout the life cycle of their business.
Citizens Commercial Banking is the commercial banking division of Providence, R.I.-based Citizens Financial Group. For more information, please visit the Citizens Commercial Banking website. For a copy of this year’s survey, please go to Middle Market M&A Outlook 2017.
In late 2016, Citizens Commercial Banking conducted a survey of 600 U.S.-based middle market business decision-makers who are open to or currently engaged in some form of corporate development activity, including mergers, acquisitions and raising capital. For the purposes of this survey, middle market businesses are defined as private or public companies with annual revenue between $5 million and $2 billion.
Citizens Financial Group, Inc. is one of the nation’s oldest and largest financial institutions, with $147 billion in assets as of September 30, 2016. Headquartered in Providence, Rhode Island, Citizens offers a broad range of retail and commercial banking products and services to individuals, small businesses, middle-market companies, large corporations and institutions.