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 time frame. 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.

“Despite COVID-19 and current economic uncertainties, deal-makers 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 deal-makers 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.”

The survey polled senior executives and advisers across the nation, CEOs, CFOs, owners, managing directors and other professionals involved in M&A activity. When asked about the impact this year’s election could have on deal-making, nearly twice as many respondents felt Donald Trump’s reelection would be positive for M&A (61 percent) compared to a Joe Biden victory (34 percent). Sixty-four percent see Republican control of both houses of Congress as the most favorable outcome for M&A; half as many (32 percent) view Democratic control of both houses as positive.

“It is no surprise that a Donald Trump reelection and Republican-controlled Congress would be viewed positively by deal-makers from an M&A perspective,” said Jeff Gifford, leader of Dykema’s Corporate Finance Practice Group. "The past four years under the Trump administration have been largely positive for M&A activity, and this year’s survey results signal deal-makers’ hope for a continuation of the deal-friendly business environment and policies – principally tax policies – to which they've become accustomed."

Despite their optimism, deal-makers agreed about several looming issues. Nearly two-thirds (63 percent) of respondents ranked COVID-19 among the three greatest threats; Democrat wins in the presidency (48 percent) and Congress (46 percent) followed in second and third place among top concerns.  

The survey yielded several additional significant findings, including:

• Respondents were divided on what would be the single greatest driver of U.S. M&A activity over the next 12 months, with U.S. economic conditions (22 percent), favorable interest rates (22 percent) and availability of capital (20 percent) all vying for the top spot.
• Strategic U.S. buyers saw a resurgence in this year’s survey, ranking atop our list of most influential buyers for the first time since 2017, likely a reflection of our unique economic conditions. Financial U.S. buyers followed closely behind and remain flush with deployable capital.  
• Respondents embraced government programs to help businesses survive COVID-19 restrictions and their fallout. The Paycheck Protection Program (PPP) proved most popular; 73 percent of respondents say they accepted those loans. Just 8 percent of respondents who worked on deals involving PPP reported failing to close the deal due to the loan – a sign deal-makers were able to navigate potential hurdles involving the outstanding loans.  
• Respondents predict the following sectors will see the most M&A activity in the next 12 months: 1) Automotive; 2) Health Care; 3) Technology; 4) Consumer Products; 5) Financial Services. Notably, education jumped to number six in this year’s survey, up nine spots from 2019. Energy dropped from third in 2019 to eighth.  
• Europe ranked as the top destination for both inbound and outbound U.S. M&A activity. Central/South America and China ranked second and third for inbound activity, with those two options flipped for outbound.