What’s shaping up to be a banner year for M&A has finally begun to register at least some indication of a pullback. A survey of C-Suite executives at 150 companies nationwide finds that M&A is top of mind for only 18 percent of respondents in the current quarter. Harnessing data is nearly as important as dealmaking among respondents, and focusing on digital technologies, digital products, and/or marketing expansion to react to a more digital business environment is far more prevalent at 52 percent of responses.

West Monroe polled 150 executives at companies with $250-plus million in revenue last month, with heavy representation from healthcare (29 percent of respondents), consumer packaged goods (17 percent), and manufacturers (15 percent). The survey was conducted in late June, and asked company leaders to cast an eye forward to the third quarter. 

The responses run counter to an environment that brings daily headlines of new records–in private equity fundraisings, deal multiples and transaction volume. And helps to craft a new narrative about the current environment.

What if the ongoing M&A surge is more driven by a backlog of pandemic-sidelined deals than concrete catalysts? 

If you squint and lean in, a new picture takes form. Private equity constitutes a growing share of deal flow. This has been read in the press as a catalyst for further dealmaking as the asset class’ increasing allure shovels cash into the checkbooks of financial sponsors. But it could also be read as a sign that corporate buyers aren’t keeping pace out of an ambivalence toward dealmaking. Strategics across consumer goods, chemicals, and other sectors have inked substantial transactions, but the name of the game tends toward divestiture as corporates seek specialization. Recent studies show that internal development teams are aware that corporate carveouts haven’t performed as well as expected, which could impact future deal flow as firms seek alternative deal structures. 

The SPAC phenomenon looks to have cooled. While the rise in secondary PE activity adds more buyers, shifting ownership interest across funds inflates deal volumes. After all, no new targets are actually in play.

Mega-leveraged buyouts are back on the menu for private equity, but even here, the focus on generating returns from growth rather than cost cutting is one of several factors obscuring the path to successful exits. Blackstone, Carlyle, and Hellman & Friedman’s $30-plus billion takeover of Medline, for instance, could have a narrow path to hitting previous exit multiples, Mergers & Acquisitions analyzed previously. How long will funds chase deals with complicated, if not murky prospects?

There’s no doubt that we’re amidst a transaction frenzy. And surging deal multiples will give sellers an incentive to bring all but the most core assets to the market. But the survey data suggests we could be in for a pivot. Especially as strategics empty the cache of divestitures stored over the pandemic, and the return profile of larger LBOs comes into focus over time.