Despite fears that geopolitical concerns would stunt middle market M&A activity between the U.S. and Britain, interest among dealmakers on both sides of the Atlantic remains strong.

In both markets, Deloitte’s latest US/UK M&A Deal Monitor finds that private equity and corporate buyers continue to pursue a shrinking supply of non-public targets, which are often located in lower cost markets outside the hotspots of London, New York and Silicon Valley.

For the first half of 2017, global deal volumes eased 3.3 percent from the record levels set in the first half of 2016, according to the report. Further, U.S. M&A activity in the U.K. dropped by almost 15 percent during the period from a very hot first half in 2016, as concerns over Brexit clouded the market. In contrast, first-half U.K. M&A activity in the U.S. rose by almost 10 percent from the previous year, as British investors looked to purchase revenue growth in the U.S.

Mixed year-over-year showings aside, the report finds that U.S.—U.K. deal flow remains the world’s biggest bilateral corridor, signaling upbeat prospects for global dealmaking overall. While concerns persist over regulatory and tax uncertainties in the U.S. and Brexit in the U.K., Deloitte sees the outlook for transactional activity in the corridor remaining bullish.

At 2017’s midpoint, technology remains the hottest sector for the middle market, as businesses across sectors move quickly to adapt to a rapidly changing marketplace and heightened competition, says Deal Monitor co-author and Deloitte’s U.S. leader for the U.S.-U.K. M&A corridor, Andrew Wilson. In a promising sign for continued strong M&A activity, he notes the current boom encompasses both traditional and next-gen companies from multiple tech sectors, as well as companies from many other industries that offer, big data capabilities, innovative technologies and sector-specific expertise.

M&A activity in the U.S.-U.K. corridor has flourished for several years, with asset competition and capital availability remaining strong throughout the deal cycle. But instead of signaling an imminent end to the cycle, as is often the case, Wilson argues that with large amounts of capital waiting to be deployed, supportive financial conditions and continuing easy access to cash, a thriving M&A marketplace has the potential to get even stronger in the second half of this year and beyond.

Despite recent interest rate tightening by the U.S. Federal Reserve, M&A deal funding remains easily accessible for many borrowers. With covenant-light financing available, debt for middle market borrowers is actually getting cheaper, Wilson notes, and companies are seeking to leverage deals at five times Ebitda or more in many cases.

“The M&A market shows few signs of slowing down, with dealmakers putting aside geopolitical, economic and regulatory concerns in an effort to grow their bottom lines,” Wilson states. For many mid-market deal makers, he adds, investing in the U.S.-U.K. corridor is no longer a second-best route to organic growth, but has become a their primary growth strategy.

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