State of Middle Market M&A 2020
Capstone conducts an annual survey of company owners and executives to elicit their perspective on mergers and acquisitions (M&A) and external growth in the middle market. The 2020 report is our seventh in this series.
- Growth was generally positive in 2019. In their industries, most respondents (71%) reported modest growth, similar to 2018 data (73%).
- Respondents who engaged in M&A in 2019 dropped (from 52% to 41%) when compared to 2018.
- Participants observed similar levels of M&A activity in both 2018 and 2019 with 38% and 35%.
- Acquisition remains the most popular form of external growth, with a whopping 59% in 2019 compared to 49% in 2018.
- Time and attention demanded by the process (34%) and lack of suitable companies to purchase (40%) were the top 2 barriers to M&A faced by participants.
- Of the 41% who pursued M&A in 2019, the majority executed acquisitions (58%).
- The top driver for pursuing M&A in 2020 is to increase share of existing markets (71%).
M&A Activity Remains Modest, and COVID-19 Will Likely Impact 2020
As anticipated in last year’s State of the Middle Market M&A Report, the acquisition activity in 2019 did not reach the 2018 levels. The number of respondents who engaged in M&A in 2019 dropped from 52% to 41% when compared to 2018. Global merger and acquisition activity hit $3.9 trillion in 2019 according to data provider Refinitiv. This represents a 3% decrease from 2018. Activity was majorly driven by megadeals (transactions valued at more than $10 billion). Megadeals represented 31% of the global total, a sizable jump from 2018. In this year’s survey, participants are still positive about growth in their industries. Compared to last year, a greater percentage of respondents are certain they will pursue M&A this year (21% compared to 11%). Given the responses from our survey participants and our own observations of the marketplace, we predict M&A deals to be significantly down from 2019. According to Dealogic, the global M&A market is already set for its slowest first two months of a year since 2005. Analysts, state that coronavirus (COVID-19) fears will further impact the M&A market.
Read the full report