A significant majority of transaction professionals predict that M&A activity will accelerate in 2018. Eighty-three percent of those who responded to the Thomson Reuters Dealmakers Sentiment Survey said they expect deal volume to rise, with 49 percent anticipating an increase of 5 to 25 percent, and 34 percent of respondents expecting an increase of 25 percent or higher. Only 17 percent said deal volume will be flat or down for the year.
“Rather than sit on cash, the widely shared expectation is for companies to deploy capital on strategic acquisitions, a trend we’ve seen so far in 2018 with double-digit percentage gains for deal making across all regions,” said Matthew Toole, director of Deals Intelligence at Thomson Reuters.
One of the survey’s findings shows that corporate expectations may not jibe with reality. Of the corporate executives surveyed, 48 percent said that acquiring undervalued assets is one of their top three M&A objectives for 2018. That goal might be difficult to achieve, considering the global average acquisition multiple tied an all-time high in 2017: 14.4 times Ebitda, according to Thomson Reuters.
Second and third on the list of top M&A objectives for corporate executives in 2018 are acquiring high-growth businesses and cutting costs via economies of scale.
When asked how they plan to spend their cash reserves, 61 percent said funding acquisitions is among their top three priorities, second only to capital expenditures for organic growth for 77 percent. Paying out the cash in dividends was third, at 46 percent.
The survey respondents are most optimistic for M&A deal volume in the energy-power-commodities sector, with 18 percent of those polled expecting an increase of more than 75 percent.
So far, 2018 isn’t disappointing expectations, according to Thomson Reuters figures. Globally, M&A deals total more than $800 billion, up 38 percent from the same period a year ago and the strongest year-to-date period since 2000. U.S. M&A targets account for 47 percent of deal activity, up 65 percent from a year ago, and European M&A activity is at a 12-year high. Deals in the Asia-Pacific region are up 17 percent from a year ago.
The survey polled 275 M&A and capital markets professionals and business executives in 48 countries from November 2017 and January 2018.