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2021 CEO Survey

Mid-Market Companies

Transactions:
It’s all About Timing

Without a doubt, 2020 was a volatile year when it came to merger and acquisition activity. Amidst the uncertainty, many in the mid-market opted to delay their transaction plans, reflecting an overall global trend.

  • 57% of companies surveyed delayed their M&A timelines due to COVID while only 13% reported an acceleration.
  • 18% of companies surveyed viewed M&A as their top priority as we exit the pandemic. The force ranking of priorities showed an even split between buy-side and sell-side activity, with post-merger integration as the third priority.

18%

of CEOs viewed M&A transactions as their TOP PRIORITY

1/2

of companies who accelerated their M&A timelines are in healthcare

Newport Insight

Why the Delay?

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.

Fred Fink

Fred Fink
Managing Director, Charlotte, NC

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Why the Delay?

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. 

Fred Fink

Fred Fink
Managing Director, Charlotte, NC