Capstone Strategic’s survey of middle market executives shows most see the same (43%) or growing (31%) M&A activity in their industry. 47% are pursuing M&A in order to access new markets.

Capstone Strategic, the leading M&A advisory firm for the middle market, surveyed middle market executives from multiple industries on their growth and M&A experience in 2016 and their outlook for 2017. The survey was conducted in December 2016 and followed previous annual surveys of the middle market.

M&A activity across the board is mostly seen as the same (43%) or growing (31%).

Looking forward, our respondents are evenly split on whether or not they will pursue M&A in 2017. 35% are less than 50% likely to execute acquisitions and 35% are more than 50% likely. The top driver for pursuing M&A this year is access to new markets (47%).

As for obstacles to M&A, time and attention demanded by the process is the top barrier to pursuing acquisitions in 2017 (25%) while the most common reason for not considering M&A as a tool for growth is lack of appropriate target companies (28%).

The overall growth picture is improving. Those reporting modest growth rose from 58% in 2015 to 67% in 2016 and those reporting high growth grew from 11% in 2015 to 13% in 2016. Those reporting contraction shrunk from 9% in 2015 to 5% in 2016.

The business environment is seen by most in a positive light, with the majority reporting the same (50%) or an improved (35%) environment for growth. Compared to 2015, fewer executives saw a worsening environment for growth (8% compared to 13%).

Capstone’s CEO David Braun said: “The survey confirmed that 2016 remained an active year for middle market mergers and acquisitions and looking ahead, we believe we’ll see begin to see a renewed interest in M&A activity due to pent up demand and supply in the marketplace. 2017 presents a unique opportunity for companies that decide to execute strategic acquisitions.”

The full survey, State of Middle Market M&A 2017, can be viewed by clicking here.

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Capstone’s survey of middle market executives shows 53% likely to pursue mergers and acquisitions in 2016 compared to 41% when last surveyed.

Capstone surveyed middle market executives from multiple industries on their growth and M&A experience in 2015 and their outlook for 2016. The survey was conducted in December 2015, and followed a previous survey in 2014.

Respondents gave a mixed picture of growth for their industries in 2015. More respondents saw extremes in their industries. Those reporting high growth grew from 4% in 2014 to 11% in 2015, while those reporting contraction grew from 2% in 2014 to 9% in 2015. Between these two poles, most respondents were seeing modest growth in their industries during 2015 (58%).

How likely is it that your company will pursue some form of M&A or external growth in 2016?

How likely is it that your company will pursue some form of M&A or external growth in 2016?

The environment for growth in 2015 was seen by most in a positive light, with the majority reporting the same (46%) or an improved (36%) environment.
M&A activity across the board in 2015 was mostly seen as the same (36%) or growing (33%) when compared to 2014.

Looking forward to the coming year, companies showed a stronger inclination to engage in M&A, compared to predictions when we last asked this question in 2014 (53% certain or likely, compared to 41%).

When asked about their growth goals, respondents were evenly split between “selling current products in new markets” (40%), “creating and selling new products in current markets” (36%), and “increasing sale of current products in current markets” (38%). (Some respondents were pursuing more than one goal).

As for barriers to engaging in M&A, these were largely internal, with respondents citing “lack of resources” (33%) as a primary reason not to pursue transactions.

Capstone’s CEO David Braun said: “This survey confirms what we ourselves observed, that 2015 was an active year for middle market M&A and 2016 is likely to prove an even stronger year. We see a growing polarization between growth-focused companies and those that are sitting on the sidelines. While many companies are still holding cash, more players are emboldened to expand through external growth. This includes acquisitions but also minority ownership deals, joint ventures and strategic alliances. When growth stagnates, M&A can often provide the fastest path forward. When growth is high, companies should seize the opportunity to plan for further expansion.”

The full survey, State of Middle Market M&A, can be viewed by clicking here.

Capstone’s State of Midmarket M&A Q1-Q3 2014 Update indicates a steady growth in midmarket mergers and acquisitions.

We surveyed midmarket executives from multiple industries to learn how the first nine months of 2014 matched expectations from 2013, and to indicate any new trends in midmarket M&A. The survey was conducted in October 2014, and follows a similar survey conducted in December of 2013.

Midmarket M&A activity continued to increase despite economic uncertainty. More than half of the respondents (60%) engaged in M&A or external growth activities in 2014 and 44% are considering M&A in the last quarter of 2014.

Of the midmarket executives polled, 64% reported “modest growth” in their industries compared to 62% in 2013. “High growth” responses dropped by half from 8% to 4%. Perhaps most significantly, 24% of respondents reported stagnation in 2014, double the amount reported in the same period last year. This holding pattern may indicate continued anxiety about the economy, the political environment and government regulation.

David Braun, Capstone’s founder and CEO, noted, “As organic growth opportunities remain modest or stagnant, executives are continuously looking for new ways to grow, including mergers and acquisitions.”

While midmarket executives seem to be showing a renewed interest in M&A, they acknowledge there are hurdles to embracing external growth. Lack of time, people and money continues to be the greatest barrier to pursuing mergers and acquisitions with over half (52%) reporting insufficient resources as their biggest challenge. Insufficient resources also topped the 2013 chart (54%). 24% of those surveyed also said slow decision-making continues to be a hurdle.

In 2014, the same percentage of executives as in 2013 (28%) reported that they were concerned about the lack of suitable companies to purchase. About this Braun said, “It may be difficult to find suitable companies to acquire among those that are offered for sale. Restricting your search to for-sale opportunities is usually a mistake. At Capstone we encourage clients to expand their search and actively pursue not-for-sale acquisitions.”

Based on its survey and firsthand contacts with the market, Capstone predicts the economy will continue to recover, and as it does more midmarket companies will seize on the opportunities presented by external growth.

Braun said, “External growth embraces any strategy that leverages a relationship with another company, including strategic alliances, joint ventures, minority interest and acquisitions. When it comes to pursuing an acquisition, here’s one principle we’ve learned from years of experience: They are all for sale…for the right equation.”

The full survey, State of Midmarket M&A: Q1-Q3 2014 Update can be viewed at

For the last couple of years, corporate America seems to have been playing it safe when it comes to growth. Currently U.S. corporations are holding on to a record $1.65 trillion in cash.

Are you in a similar position, perhaps? Cash may not be your “security” blanket but you may be unwilling to take the risks needed for growth.

Based on my daily interaction with midmarket companies, I would advise you to be proactive about your business growth. Failing to do so allows your competitors and the market to control your future. What good is cash if you don’t use it to grow your business?

Fortunately, it seems that some U.S. businesses are getting off the sidelines and putting their money to use. Many are investing in mergers and acquisitions, according to a report by the Association for Financial Professionals. In fact, this is the first year-over-year decline in cash reserves since 2011.

This trend reflects a growing confidence in the U.S. economy and it also demonstrates a profitable way to use cash rather than just letting it sit around.

But what about your company? Are you “playing it safe”? It’s not too late to take a proactive, strategic approach to growth. Here are four suggestions for putting your money to work rather than hoarding it:

  • Mergers and Acquisitions – Use M&A to grow quickly. Add a new customer base, enter a new market, or gain a new technology or capability. The core benefit of acquisition is that you have a ready-made solution you can use on day one, without building it yourself.
  • Stock Buybacks – Public companies will use excess cash to repurchase their own shares if they believe the price is undervalued. While stock buybacks don’t create any real growth for the company, they increase the earnings per share and can be a tax-efficient way to distribute earnings to investors.
  • Research and Development – For some, organic growth is a better pathway than M&A. Invest in the future: What will your customers want in a year from now and in 10 years? Use your money to develop new products and services. See how you can be best positioned for future growth.
  • Plant and Equipment Upgrades – Updating your physical assets can help you become more efficient, reduce costs, improve your services, and prepare for future growth. For example, upgrading plant equipment might improve safety and reduce down-time caused by accidents. Upgrading your software might allow you to process more orders per employee and build for scale.

Whatever course of action you decide to take, don’t sit on the sidelines or cling to a false sense of security. If you’re not growing you’re dying.

*This post was originally published on LinkedIn

With a 70% failure rate for acquisitions, it seems like the odds are against you from the beginning. Before you get scared off, however, let’s take a closer look at what that 70% means.

The 70% failure rate is mainly based on large, publicly traded transactions because large transactions must be reported to the SEC, and information on public companies is generally available. In addition, these large transactions tend to make the news more often since people are fascinated by massive deals involving well-known brands.

Despite this focus on large acquisitions, there are hundreds of smaller, unreported transactions involving middle-market companies and privately held businesses.

We call these types of deals “taking small bites of the apple.” Instead of huge, transformative deals, which tend to be a bit difficult to swallow, smaller, strategic acquisitions achieve a higher rate of success.

Acquisitions are a powerful tool for sparking growth and may be the only way for you to reach your goals. Acquiring smaller companies does not completely eliminate your risk, but conducting multiple, smaller acquisitions, enables you to take manageable steps to executing your growth strategy.

As with any business initiative, you must take some risk to reap the rewards. Following a carefully planned strategy and a proven process will help minimize your risk and optimize the success of your acquisition.

Midmarket deal flow expanded at the fastest rate in six months, according to a study conducted by Mergers & Acquisitions in April. The survey has positive implications for midmarket growth. As I’ve mentioned previously on my blog, midmarket companies have faced increased competition from larger players and small mom and pops.  Faced with this “squeeze,” it’s likely midmarket companies turned to M&A to spark growth.

A minority of investors have expressed concerns that midmarket activity may actually slow down in 2014, compared with 2013 activity levels.  Growth in the middle market may plateau for a few reasons all of which hinge on uncertainty in the economy including sequestration and the ongoing open-discussion over the U.S. debt ceiling. Health-care reform costs and talent gaps may also contribute to a slowdown in 2014.

According to a survey conducted in Q3 2013 by the National Centre for the Middle Market (NCMM), middle-market companies (generating between $10 million and $1 billion), in revenue can expect slower expansion over 2014 as revenue and employment growth are expected to slow over the next year.  This quarterly survey took responses from 1,000 C-level executives. The responses showed that on average revenue is expected to grow at a lowered rate of 4.4 % through the next year compared with the 5.1 % estimated from the previous quarter. Additionally, only 61 % of the middle-market executives surveyed said they would invest an extra dollar if presented with that opportunity as compared with 64 % last quarter.  Furthermore, the survey found that hiring among midmarket companies is expected to grow only 2.1 % over the next year, a drop from the 2.5 % predicted last quarter.

This post is part of a series addressing current and expected viewpoints on M&A from across a number of professionally relevant sources. 

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Private equity investors and strategic buyers are enthusiastic about 2014. Of the U.S. executives polled recently by EY Americas Transaction Advisory Services, 41 % said they expect to pursue at least one acquisition in 2014, compared with only 23 % polled at the end of 2012.  Uncertainty in regulation remains one of the biggest challenges facing PE firms. Despite this the PE market is growing and private equity activity has begun to make a comeback. Recently released GF data shows valuations acquisitions valued between $25-50m increased to 6.9x EBITDA in 2013.

Family offices will become more accessible for investment opportunities in 2014. Numerous family offices have begun directly investing in or purchasing private companies over the last few years. Family offices have improved capabilities of directly investing, thus allowing them to bypass some of the drawbacks that come from investing via PE funds – such as fees, illiquidity and a lack of control. This trend is expected to continue in 2014, with 2013 seeing a 50% increase in the number of family offices actively pursuing private company investment opportunities.

This post is part of a series addressing current and expected viewpoints on M&A from across a number of professionally relevant sources. Read parts one, two and three of our Midmarket M&A Analysis. 

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This is the third part in a series addressing current and expected viewpoints on M&A from across a number of professionally relevant sources. Read parts one and two of our Midmarket M&A Analysis. 

Industries that showed strong growth in early-stage activity in Q3 2013 included the consumer, life sciences, and telecommunications, media and entertainment (TME) sectors.  Additionally there has been increased activity in the financial services sector.  For Q3 2013 the number of financial services deals reaching due diligence phase was 29% up Q3 vs. Q2 and early stage activity in TME was found to be up 69% up year on year.  Additionally the life sciences and consumer sectors are showing increased activity with the number of life sciences deals reaching due diligence phase 13% up Q on Q and consumer sector early-stage activity up 45% year on year. Furthermore, respondents of a Mergers & Acquisitions survey identified health care, technology, energy and manufacturing as sectors where they expect to see the most growth in for 2014. In support of these sentiments, according to a survey by KPMG, in 2014 the industries expected to have the most M&A activity are technology, media and entertainment (44% of respondents), healthcare/pharmaceuticals/life sciences (41%), financial services (28%), and energy (27 %).

The most attention-grabbing sector for the US has been technology, media and entertainment (TME), alongside a number of megadeals across a range of other sectors. In Q3 2013, announced deals in the TME sector grew year-on-year by 50% in volume and 26 times in value to 25 deals worth US$129.5bn. North American TME companies have been attractive targets of consolidation activities.

The energy industry, and the changing nature of energy supply will be central to global market activity.  Commentators have observed that everything involved in and around fracking will be significant). In addition healthcare — especially as impacts of the Affordable Care Act become clear, is expected to be important through the year and that those involved in healthcare technology and information industries will be the most active.

Telecom M&A is expected to be the focus of much activity in 2014 following signs of gathering strength through 2013 with larger sized deals closing.  Telecoms, by far the most significant sector for the year, accounted for 21% of US M&A activity in 2013 – driven by the $130billion Verizon-Vodafone deal, the second largest deal on record (6).

Consumer M&A activity, particularly in retail, has also seen notably increased activity. In particular luxury retailers that were hit heavily by falling demand during the recession have had some successful rebounding. The retail sector generally is appealing to private equity dealmakers, creating a further driver of consumer M&A activity in the US, with sizeable activity in both buyouts and exits. Industry experts expect the M&A climate to generally trend upward for the US through 2014.


This is the second part in a series addressing current and expected viewpoints on M&A from across a number of professionally relevant sources. For part one, read Midmarket M&A Analysis: 2013 to 2014.

2013 saw a number of announced large-cap deals aimed at consolidating market positions and facilitating growth into new regions. Most notable has been Verizon Communications’ announcement of the purchase of the remaining 45% stake in Verizon Wireless from Vodafone. The deal is valued at US$124.1bn and will be the third-largest deal of all time and the biggest in the past decade.

At the same time, completed deals under $1 billion soared in October 2013, as data from Thomson Reuters demonstrates which is leading dealmakers to express continued confidence in middle-market M&A growth.

“Barring a significant macroeconomic shock, 2014 is poised to be a great year for middle-market deal making,” says Mark Brady, global head of M&A at Chicago investment bank William Blair & Co. LLC. Of those who participated in a Mergers & Acquisitions survey conducted in late November and early December, 71 % of respondents said 2014 will be a better year for mid-market M&A than 2013.

In fact, the pendulum seems to be swinging towards the midmarket. According to a KPMG survey there will be very few megadeals in 2014, with middle-market deals dominating M&A. 77% of respondents expect their respective deal activity will be valued under $250 million, followed by 12 % who anticipate their acquisitions will be valued between $250 and $499 million, and only 5% between $500 and $999 million.  

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Following the credit crisis of the last few years and the resulting substantial decline in M&A activity, the subject of a revival in M&A activity has been much anticipated and discussed by industry participants and observers.

This week, we will release a series of blog posts providing a synthesis of M&A sentiment and opinion, incorporating the current and expected viewpoints being expressed across a number of professionally relevant sources. Today we’ll address the outlook for 2013 vs. 2014.

2013 to 2014

Businesses are increasingly turning to M&A to achieve long-term growth and it appears that confidence has returned to the M&A market.

Longer-term economic growth should help bolster US M&A activity and allow it to continue through the upcoming few years.  Supporting this view, the latest World Economic Outlook from the International Monetary Fund forecasts that the US economy will grow by 2.6% in 2014 and 3.4% in 2015.

When compared against S&P 500 firms middle-market businesses show strength and growth opportunities for 2014.  Revenue growth at S&P 500 firms was 2.6 % over the last calendar year whereas middle-market businesses saw revenue growth of 5.5 % over that same period.  Additionally, the NCMM predicts that the next 12 months will see 4.4% revenue growth from middle market firms, as compared to a 1% prediction for S&P 500 firms – more than double the rate of growth.

Following on from Q2 2013, through which there were 7,993 deals valued at a total of $187 billion, making an increase of 0.9% in deal volume and value, 2014 looks set for promising M&A activity.  Largely, fundamentals have remained convincingly strong from the second part of 2013 but the question remains if those conditions can continue through 2014.   Early-stage deal flow in the middle market is accelerating, and dealmakers expect the momentum to continue into 2014 following the substantial upward movement observed from fall 2013, according to polls taken by Mergers & Acquisitions in Q4 2013.

Positive sentiment is indicated in a survey by KPMG LLP, which has found M&A activity is expected to continue the trends of 2013, or grow somewhat, through 2014.  Of more than 1,000 M&A professionals, investors and advisors who participated in their survey, 63% anticipate that their U.S. companies or clients will initiate at least one acquisition in 2014 and 36% of respondents expect that their companies or clients will complete a divestiture in 2014(5). Additionally, among the 145 C-level executives surveyed, almost 75% anticipate their company will make an acquisition in 2014, compared to approximately half in 2013.

Furthermore, the Intralinks Deal Flow Indicator (DFI), an independently verified predictor of future changes in the global volume of announced M&A transactions, has indicated an increase in investor and corporate confidence.  DFI Q3 results have shown strong growth in global early-stage M&A activity, rising 18% year on year.   This indicator points to returning enthusiasm for M&A-led growth over the next six months.

Strong debt and equity markets have the potential to motivate divestitures and exits and this will aid M&A momentum in 2014.  Robert Profusek, global head of M&A at law firm Jones Day, comments: “The deal finance markets have never been better.”


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