News & Insights

Dealmaker Optimism Soars to Record High in Dykema 14th Annual M&A Survey

Impact of Trump Administration, Midterm Elections and the Rise of Automotive M&A

October 17, 2018

Respondents to Dykema’s 14th Annual M&A Outlook Survey expressed the highest level of optimism for the M&A market in the 14-year history of the firm’s survey.

Sixty-five percent of respondents expect the M&A market to strengthen over the next 12 months, significantly up from the mid- to high 30s where it has remained for the past several years. The increased optimism is tied to economic conditions, with 64 percent of respondents indicating a positive outlook on the economy during the next 12 months.

“The spike in optimism in this year’s survey was not a surprise. We’ve been hearing a similar sentiment from all of our clients, largely fueled by the strong economy, successful completion of several major megadeals this year, and the strength of the financial markets when the survey was taken in the summer of 2018,” said Thomas Vaughn, co-leader of Dykema’s M&A practice. “While there is no sign of optimism in M&A slowing down, many in the industry are wondering if it will be able to continue at this pace and, if not, when the next downturn will arrive.”

With the upcoming 2018 midterm elections, Dykema asked respondents what impact a change from Republican majority to Democratic majority in the House of Representatives or Senate would have on the M&A market in 2019. The results show respondents believe that a Democratic majority in Congress after the mid-term elections would have a positive impact on M&A, with 46 percent of respondents indicating a positive impact for M&A in the case of a Democratic victory in the House (36 percent negative) and, for the Senate, 48 percent indicating a positive impact for M&A (35 percent negative).

The survey yielded a number of other interesting conclusions, including:

  • Seventy-five percent of respondents said they would be involved in an acquisition in the next 12 months, up from sixty-eight percent in 2017
  • Eighty-two percent of respondents expect there to be an increase in M&A activity involving privately owned businesses in the next 12 months
  • For the fifth year straight, availability of capital remains the top factor responsible for fueling U.S. M&A activity
  • Fifty-eight percent of respondents used representations and warranties insurance in a deal in the last 12 months
  • Most respondents foresee a significant or somewhat positive impact on M&A markets from the corporate tax cut (81 percent), U.S. repatriation tax changes (78 percent), personal income tax decreases (68 percent) (Question 17)
  • Respondents predict the following sectors will see the most M&A activity in the next 12 months, ranked in the following order: 1) Automotive; 2) Energy; 3) Consumer Products; 4) Healthcare; 5) Technology

“One of the more interesting findings from this year’s survey is the respondents selected the automotive industry as the sector they expect to see the most M&A activity in the coming year, with healthcare and technology dropping to the fourth and fifth sector ranking,” said Stephen Sayre, co-leader of Dykema’s Mergers & Acquisitions sub-practice group. “Dealmaking in this section could be vigorous as the automotive industry hits a wave of disruption with the rise of connected and driverless cars.”

Survey results are being released at Dykema’s exclusive annual M&A Outlook events throughout the month in Detroit and Chicago. The full report is available here.