Interest among middle market companies in both buying and selling has increased significantly in the past year, fueled by rising valuations, economic optimism and an ongoing drive to find growth, according to the seventh annual Citizens Commercial Banking Middle Market M&A Outlook.
The bank’s survey of 400 business leaders showed a boost both in activity and confidence over 2017.
Both sellers and buyers agree that the seller’s market of the last few years will likely continue. Fifty-six percent of sellers are either currently involved in or open to M&A activity in 2018, up from 48% in 2017. Seller confidence is also on the rise as 35% of sellers are highly confident they will complete a deal this year, compared with 25% in 2017.
“Our survey shows the number of companies interested in selling continues to trend upward,” said Ralph M. Della Ratta, head of M&A Advisory, Citizens Capital Markets. “There is still a Baby Boomer overhang with a lot of owners waiting for the right time to sell. Several factors such as the tax reform law and historically high valuations certainly give them a great opportunity to make a deal.
“While these high valuations are giving potential buyers some pause, more acquirers see the value of M&A as a growth strategy.”
The Citizens study examined the annual appetite for mergers and acquisitions among middle market companies – companies with annual revenue between $25 million and $3 billion – that are key creators of jobs and drivers of economic activity in the U.S.
Acquisition continues to be an important growth strategy for many companies as buyers are planning to be more active in 2018, the survey found. About three-quarters of buyers report being currently involved in or open to an acquisition. Buyer confidence is also significantly stronger heading into 2018 with nearly half of buyers (47%) confident that growth through outside investment is an appropriate strategy, versus 30% in 2017. Forty percent of buyers are extremely confident that an acquisition will be completed in 2018, compared with just 23% in 2017.
Other key findings from this year’s survey include:
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