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Sunday, 01 November 2015 21:34

M&A deal flow could be peaking, Dykema survey shows

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Fewer M&A professionals and business executives expect deal flow to strengthen in the year ahead.

That’s according to an annual survey by law firm Dykema that indicates M&A activity could be peaking after a hot market the last few years.

Of the attorneys, brokers and senior business executives surveyed, only 37 percent said they expect a stronger M&A market in 2016. That compares to 59 percent a year ago who expected strengthening in 2015. Twenty percent of the survey respondents expect the M&A market to weaken next year, compared with just 9 percent a year ago.

Meanwhile, 42.7 percent of respondents expect no significant change.

Tom Vaughn, co-leader of Dykema’s M&A practice from the firm’s Detroit office, said the results of the survey, conducted in August and early September in a cross-section of economic sectors, reflect a market that’s been in an extended period of strong activity.

“M&A activity in 2015 surged for much of the year, but respondents clearly are wondering how long it can last,” Vaughn said. “Many of the strong overall results were driven by megadeals, but we agree with the findings that while the outlook for the next year is not as strong as it was a year ago, there is still a great deal of positive momentum in the M&A market.”

The Dykema report notes that the survey occurred “during a period of acute turmoil for world markets and the lead-up to the Federal Reserve’s September 2015 decision on interest rates — which may have heightened dealmakers’ concerns regarding these issues.”

Driving deal volume in 2015 has been the availability of capital, which was cited by nearly half of survey respondents as being the factor most responsible for fueling activity, followed by the U.S. economy at 22 percent and favorable interest rates at 17 percent.

Tracy Larsen, an M&A attorney and managing partner at the Grand Rapids office of Barnes & Thornburg LLP, hopes a strong market can continue in 2016. If capital to finance deals remains readily available and there’s confidence in the economy, “Yeah, we’re going to be busy again,” Larsen said last week during a best practices panel discussion at the third-annual MiBiz M&A Deals and Dealmakers of the Year Awards.

Greg Williams, the CEO of Caledonia-based Acrisure LLC that’s steadily been buying insurance agencies across the country, expects deal flow in his industry to remain “just as hot in 2016, if not hotter than in 2015,” so long as capital and credit are available.

The financial services sector has been particularly active over the last two years. Nearly 28 percent of survey respondents expect M&A activity in financial services to continue to gain momentum through mid-2016 and about the same percentage expect momentum to grow through the end of next year.

Len Amat, chief operating officer for business operations at Chemical Financial Corp. that’s been an active buyer in recent years, said during the MiBiz panel discussion that consolidation that’s already occurred in the banking industry will eventually begin to impact activity as the best deals get taken.

“Obviously, the number of banks is dwindling, so the opportunities dwindle as well,” Amat said.

In the Dykema survey, 48 percent of respondents said they were bullish on the U.S. economy for the next 12 months, versus with 62 percent a year ago.

Thirty-eight percent believe the U.S. economy will improve in 2016 over this year, 18 percent expect it to worsen, and 43 percent “see no significant change.”

Read 2347 times Last modified on Sunday, 08 November 2015 16:43

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