The ceiling is no barrier for the M&A market, according to a recent survey of dealmakers. Despite already record transaction values and a Federal Reserve poised to raise interest rates, buyer expectations continue to rev higher. The latest data point comes from a Grant Thornton survey of 156 dealmakers: 68 percent of those surveyed say deal volume will increase in the new year.
They’re not alone. The bullish sentiment is evident seemingly everywhere, says EY Americas private equity leader Chris Smyth, speaking only this morning about trends in the asset class at a media roundtable.
“A lot of investors learned from the financial crisis, they were sitting on the sidelines for too long,” Smyth notes. The diverse array of fundraising from public private equity funds and previously equity-focused funds that are now fundraising for credit strategies creates, “A lot of activity on many fronts,” he said.
The composition of the Grant Thornton survey base is instructive. More than a quarter of respondents work in private equity. The asset class has achieved a record 30 percent slice of deal flow, so perhaps it is no wonder that its constituents are bullish about M&A and its prospects.
Where will the increase in activity strike next? For the surveyed set, yesterday is predictive. Technology, media and telecom, Healthcare, and Business Services are expected to top league tables as they have so far this year. Sectors seen attracting the most preliminary bidding interest in real time, at least among middle market participants, were near the bottom of the list. Education, food, and hospitality deals may be out of mind since the paucity of merger headlines leaves them out of sight.
Those figures also track for deal value expectations. Just over half of the polled dealmakers think the rich multiples paid in 2021 are paving the way for even more saturated 2022 valuations.
“It has been a record year on all fronts, I’ve been working with PE for 20 years, and this truly is a year like no other,” Smyth said.
Many dealmakers in PE and corporate boardrooms may be hoping for a repeat.