Last week the national law firm, Dykema, released its seventh annual Mergers & Acquisitions Survey, compiled from a polling of 299 deal makers among leading company executives and investment firms in the U.S. Although the survey results have been variously reported as disappointing with respect to year-over-year M&A metrics, there are also a number of encouraging indicators for middle market technology firms looking for an M&A event in 2012.
Not surprisingly, the most frequent obstacle to successful deals is the continued uncertainty related to the global financial crisis. In addition, the potential negative impacts to U.S. domestic and foreign policy resulting from the upcoming 2012 elections leads to less favorable M&A market expectations for 2012 as compared to 2010 forecasts for 2011. There is anticipation for an increased number of distressed transactions in the upcoming year as well as an expectation for an increase in purchase agreement provisions related to purchase price adjustments, earnouts, financial contingencies, etc. Nonetheless, 90% of respondents believe that the U.S. M&A market in 2012 will be the same or stronger than it was this year.
Strong capital availability and strategic buyers looking to achieve growth via acquisition are the dominant drivers on the M&A landscape. And although private equity firms may be outbid by deeper pocketed corporate buyers, the financial buyers have a real need to deploy capital and this will help drive valuations.
About 60% of the survey respondents expect to be involved in at least one acquisition in 2012. And respondents expect small and middle market deals to significantly increase in 2012 70% anticipated deals under $50M to increase in volume, and 60% expected an increase in the $51M - $500M segment.
Despite the high degree of caution expressed for the upcoming year, middle market M&A activity is anticipated to remain strong and the ample supply of capital coupled to the competitive tension among strategic and financial buyers should produce strong valuations. The U.S. market continues to be favorable for sell-side M&A.