Middle-market M&A, which began to pick up in the fourth quarter of 2013, is expected to accelerate in 2014, according to strategic buyers, private equity investors, investment bankers, attorneys, accountants and other advisers polled and interviewed recently by Mergers & Acquisitions.

With 638 mid-market deals completed, the fourth quarter was the strongest of 2013, according to data from Thomson Reuters. And M&A practitioners expect deal flow to continue ramping up. Nearly three quarters of the middle-market dealmakers polled by Mergers & Acquisitions in December say they expect 2014 to be a better year than 2013 for M&A in general and for their firms in particular. That's up slightly from those polled in November.

"Barring a significant macroeconomic shock, 2014 is poised to be a great year for middle-market dealmaking," says Mark Brady, global head of M&A at Chicago investment bank William Blair & Co. LLC. Brady was the winner of our M&A Mid-Market Award for 2012 Best Dealmaker of the Year. "Our sell-side backlog is up, and conditions in the markets are strong."

Dealmakers have "looked to opportunities in the debt market to recapitalize and monetize existing investments," says Martyn Curragh, PwC's U.S. deal leader. Given the "pipeline of deals and today's strong debt and equity markets, which help fuel divestitures and exits, we expect that M&A momentum to continue," he says.

Strategic buyers, as well as private equity investors, are enthusiastic about 2014. Of the U.S. executives polled recently by EY Americas Transaction Advisory Services, 41 percent said they expect to pursue at least one acquisition in 2014, compared with only 23 percent polled a year earlier.

The underlying conditions are favorable for M&A, including "historically low interest rates, availability of credit, an abundance of PE and corporate cash and limited organic growth," says Eric Malchow, managing director and co-president, North America, of Chicago investment bank Lincoln International. These factors were also present in 2013, but there was a "gap between seller expectations and what buyers were willing to pay."

In 2014, the gap is starting to narrow.

"There's more credibility going into 2014 with financial statements," argues Malchow. "Buyers will have more confidence in the forecasts they're looking at."

For acquirers, "risk aversion continues to abate with improving earnings results, and an increasingly stable economic climate," agrees Robert Goldsmith, CEO, BCMS Corporate LLC (North America), a New York investment bank that focuses on the lower middle market. One particularly promising sector for M&A is niche industrial manufacturing, says Goldsmith.

Also ripe for M&A in 2014 are sectors undergoing transformational change, says David Williams, CEO of Deloitte Financial Advisory Services LLP, pointing to health care; financial services (especially banking); oil and gas; and consumer goods and retail.

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