Senior middle-market dealmakers and their advisors in the New York City area hold mixed views about the America’s economic performance this year, according to survey results issued by ACG New York, the area’s leading association of deal-making professionals.

A substantial minority (46%) of the dealmakers and advisors say the U.S. economy at the end of 2013 will be about the same compared with the end of 2012. However, an almost equal number (43%) believes it will be better (40%) or much better (2%). Meanwhile, a noticeable group (11%) believes it will be worse (10%) or much worse (1%). The optimists, believing the economy will be better or much better outnumber the pessimists, believing it will be worse or much worse by about four to one.

“We believe attendees at our events reflect a cross-section of the deal-making community not only in the New York area but across the nation,” Martin Okner, ACG New York president and managing director, SHM Corporate Navigators.

In keeping with the view that things are likely to stay the same or get better, a majority of the respondents (58%) say it is unlikely or very unlikely that the U.S. economy will enter a recession in 2013. However, a sizeable minority are worried or pessimistic (42%), saying that it’s an even bet that a recession will occur (34%) or that its occurrence is likely or very likely (8%).

Respondents split on whether U.S. unemployment at the end of 2013 will be higher or lower or the same as the 7.8% reported by the Department of Labor for December 2012. A total of 84% say it will either be unchanged (38%) or lower (46%), but a total of 54% say it will either be unchanged (38%) or higher (16%). Those who say it will be lower outnumber those who say it will be higher by almost three to one.

A substantial majority (74%) of the dealmakers say their firms’ overall unit volume will increase by year-end 2013 over year-end 2012.  However, a noticeable 26.4% say their firm’s unit volume will remain the same (22.6%) or decrease (3.8%).

Most (93%) think their firm’s employment at the end of 2013 will be the same (47%) or increased (46%) from year end 2012. However, 7% say their firm’s employment will have decreased. This question was not asked of attendees at the Long Island event in January or of those attending previous events.

Fiscal Cliff Compromise

The dealmakers were asked for their reaction to the “fiscal cliff” compromise reached by Congress and President Obama. They essentially split, with 51% saying the compromise was overall economically desirable for the nation and 49% saying it was undesirable.

As for their view of how the compromise affected them, 60% of the dealmakers said it was economically undesirable for themselves, while 40% said it was economically desirable for them.

U.S. Economic Issues

The dealmakers were nearly unanimous when asked what they expected from Congress and the Obama Administration on selected national issues during 2013.

A substantial majority foresee no reduction in the national debt (85% ), compared with 15% who foresee a reduction.

They foresee that Congress and the Obama Administration will not pass a balanced budget (88.5%), with only 11.5% saying the budgeted will be balanced.

They generally do not expect that the lawmakers and Administrator will simplify the tax code (86.5%), although 13.5% believe the code will be simplified.

A large majority (77%) believes that defense spending will be cut, although in this case a noticeable minority (23%) says it will not be cut.

On two business tax issues—carried interest and the deductibility of business interest--the dealmakers split:

• A clear majority (67%) expects that Congress and the Administration will during 2013 increase the tax rate on carried interest, the payment received by private equity firms for managing money invested for third parties in the firm’s portfolio companies. However, a sizeable percentage (33%) does not expect a tax rate increase.
• A clear majority of dealmakers (59%) say that during 2013 the Government will not eliminate or reduce the deductibility of business-interest expense. However, a substantial minority (41%) says that during 2013 the deductibility of business-interest expense will be eliminated or reduced.

Global Activity

Respondents were asked whether their firms’ plans called for increasing, decreasing or holding steady their deal-making and/or deal-making services activity in various regions.

Sizeable numbers said plans call for increase activity in Canada (30%), Europe (35%), Asia (38%), and Latin America (31%).

Background

The written survey was conducted in mid January by ACG New York of attendees at three of its events held in Hempstead (Long Island), New York (Manhattan), and Tarrytown (Westchester), N.Y., as well as of attendees at previously held events. The nonprofit association received 164 replies. Respondents identified themselves as being primarily employed in private equity and investment banking (23%) and lending (22%), as well as in services such as law, accounting and valuation necessary to close transactions (45%).

The respondents identified themselves as having the following positions/titles within their companies: Partner (22%), Senior vice president (19%); %), Managing director (15%), Vice president (11%), Director (10%), Principal (8%), Other (7%), CEO (5%), Associate (2%), CFO (1%).

ACG New York, founded in 1954, is the leading membership organization in New York that facilitates relationship building and focused education for middle market deal-making professionals.

View the entire ACG New York Survey, which includes a tabulation of the responses.