In Deloitte’s seventh M&A Trends report, we asked 1,000 executives at corporations and private equity investor (PEI) firms for their insight on current deal activity and expectations for the next 12 months.
Dealmakers anticipate M&A activity will continue at an active pace in 2020, extending the prolonged boom in deals that has resulted in more than $10 trillion in domestic transactions since 2013.1 Our 2020 M&A Trends survey reveals clear and strong signals that deal activity will persist, with just 4 percent of respondents forecasting a decline in the number of deals in the 12 months ahead. And only a sliver of our survey respondents (2 percent) anticipate a dropoff in deal size in the year ahead.
Survey results reveal some moderation in expectations that transaction activity will increase; 63 percent of respondents say that transaction activity will increase somewhat or significantly, down from 79 percent a year earlier. More muted enthusiasm seems natural at this stage in the M&A cycle, which follows seven years of heady growth and record-setting activity.
What other M&A trends do dealmakers predict for 2020?
- Divestitures remain popular for corporates: 75% of corporate respondents expect to pursue divestitures in 2020, the second highest level in the past four years. Change in strategy, financing needs, and divesting in technology that no longer fits with the emerging business model were cited as the most important reasons for divesting a business among corporate respondents.
- Data protection and related regulations, along with shareholder activism, are among emerging M&A trends driving strategy and activity. We’re also seeing active board involvement as directors lean in to monitor whether deals are meeting expectations.
- Dealmakers expect to increasingly focus on domestic transactions in reaction to persistent concerns about political and trade instability.
- Despite general optimism for M&A in the year ahead, challenges remain as dealmakers faced diminishing ROI on transactions in recent years. Of all dealmakers, 46% say that less than half of their transactions over the last two years have generated the expected value or return on investment.
What else is driving dealmakers’ expectations of the year ahead? And what are the critical factors likely to affect activity and deal value? To find out, read the full 2020 M&A Trends report.