2021 CEO Survey

While 2020 started out active for middle market M&A, transactions that were not well underway by the time the pandemic started to impact the economy were often postponed or taken off the market. Of the transactions that continued to move forward, many were repriced. Buyers used the pandemic induced uncertainty to re-trade prices, often by 30% or more. Also, transactions in markets that were perceived to benefit from the pandemic – from video conferencing to home delivery to telehealth – experienced accelerated growth in revenues and valuations. Buyers, Sellers and intermediaries who continued to operate during this time rapidly deployed technology to expedite transactions remotely and reduce in person activities.

Looking forward, in 2021 we expect to see an acceleration in activity on both the Buy side and Sell side fueled by a few factors. As noted in the survey, 57% of companies delayed deals in 2020, creating a significant backlog and many of those transactions will start to come to market beginning Q2 2021. Interest rates remain at or near historical lows, available private equity is in excess of $1.5 trillion, the performance of the stock market and the rapid growth in SPAC’s all contribute to an attractive environment for completing transactions. In addition to the backlog, the Biden administration’s infrastructure initiatives will have a twofold effect, both spurring new activity within some sectors as well as incentivizing accelerated deal making due to concerns around pending increases in corporate tax rates and capital gains tax rates to fund those same infrastructure initiatives (although changes in tax rates may well be made retroactively). 

Intrigued about the prospect of a transaction in 2021? Learn more about Newport’s Business Sale & Transaction expertise.