This week the Merrill Corporation released its most recent survey results of 30,000 Mergers and Acquisitions (M&A) professionals across the world. Many of the findings probably aren’t all that surprising, but some might be.
The Broad Infographic First
Before delving into the details, here is Merrill Corporation’s broad infographic of their survey results.
Shown in the infographic are five areas of top-line results, which deal with the top industries, the drivers of M&A activity, the geographic breakdown of M&A activity, predictions for M&A activity down the road, and the timeline of activity.
Source: Merrill Corporation
The Industries
The first observation of Merrill’s survey results is the top-line industries for M&A activity. They report that respondents think the top 3 industries for expected deal flow are IT Service Providers, Manufacturing, and Energy.
Is anyone else surprised by these? Manufacturing is just now beginning to see signs of life after a very weak 2016 (almost recessionary for the Manufacturing industry). If there’s an industry that should have already had its peak, it would be Manufacturing (at least if you think M&A activity happens when prices or industry activity may be depressed).
The other two are less surprising, although they keep up with idea that IT and Energy are hot. Maybe the heyday could already be over (at least for the current economic cycle).
Source: Merrill Corporation
The Drivers of M&A
The second observation is the stated reasons behind the M&A activity. Almost half of respondents indicated that they thought “Strategic M&A” was the largest contributor to M&A activity, well ahead of second, third, and fourth places Consolidations, Improved Conditions, and Attractive Valuation.
Improved Conditions and Attractive Valuations are not surprising. The surprising thing is how strong “Strategic M&A” came in. Who would have thought that after 8 years of economic recovery/expansion “Strategic M&A” would be on top.
Source: Merrill Corporation
The Regions Behind M&A Activity
The third interesting observation is just how dominant American M&A activity is. One might wonder when China and Europe will start waking up to the idea that the financial industry – and its activities – can actually be quite beneficial to economic growth.
Sources: Merrill Corporation
The Predictions
The fourth observation is just how subdued the outlook is. An incredible 61 percent of respondents said they only expected a “moderate increase” in M&A activity over the next 12 to 24 months. Since when did M&A professionals become so “slow and steady”? The industry is known for being on one extreme or the other – fast and furious or feast and famine. Something is wrong when most are thinking such solemn thoughts.
Source: Merrill Corporation
The Timeline
Lastly, isn’t it a little bit surprising that only 3 percent of respondents are planning M&A activity in 18 to 24 months? This could be an indicator that something is wrong with the economic environment.
Source: Merrill Corporation
Conclusion
Overall, the results of Merrill Corporation’s most recent M&A survey provide some interesting insights into industry insiders’ views of the coming future. Time alone will tell if these predictions come to fruition or not.
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