State of Middle Market M&A 2021
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 2021 report is our eighth in this series.
- Growth was generally positive in 2020 with most respondents observing a positive growth picture in their industries. 59% of respondents reported modest growth in 2020 as compared to 72% in 2019. 13% reported high growth in 2020, as compared to 10% in 2019.
- We have received a mixed response for the M&A activity in 2020. 34% of respondents reported less activity in 2020 compared to 2019 (16%). Whereas the number of respondents who reported more activity as stable with 36% in 2020 as compared to 35% in 2019.
- 65% of respondents stated that COVID-19 had a medium effect on their business in 2020.
- The percentage of those who engaged in M&A or external growth activities in 2020 (43%) is similar to 2019 levels (41%).
- Acquisition remains the most popular form of external growth, at 61% in 2020 compared to 59% in 2019.
- Time and attention demanded by the process (30%) and lack of suitable companies to purchase (28%) were the top 2 barriers to M&A faced by participants.
- Of the 43% who pursued M&A in 2020, the majority executed acquisitions (61%).
- The top driver for pursuing M&A in 2021 is to access new markets (65%).
- 41% of the respondents stated that they expect COVID-19 to have a medium effect on business growth in 2021.
M&A Activity Remains Modest
As anticipated in last year’s State of the Middle Market M&A Report, COVID-19 did have a moderate impact on most industries. 65% of respondents stated that COVID-19 had a medium effect on their business in 2020. 59% respondents reported modest growth in 2020 as compared to 72% in 2019. However, the percentage of those who engaged in M&A or external growth activities in 2020 (43%) is similar to 2019 levels (41%).
Given the responses from our survey participants and our own observations of the marketplace, we predict robust M&A activity for 2021. In February alone, deals totaling $405.3 billion were announced globally, an increase of 45% compared with the same month last year. If 2020 was all about survival, 2021 is all about growth.