M&A professionals optimistic about deal volume — Grant Thornton

ILLINOIS, UNITED STATES — Mergers and acquisitions (M&A) professionals are expecting a surge in deals over the next six months amid anticipation of strong macroeconomic fundamentals. 

A survey of 238 M&A professionals by audit and assurance, tax, and advisory services provider Grant Thornton found that 81% expect deal volume to increase.

Their optimism hinges on a favorable outlook on the United States economy. Sixty-seven percent expect stable or lower interest rates, technology innovations, and stabilized or reduced inflation.

In terms of segments, respondents believe that technology, media, entertainment and telecommunications as the industries that will have the most M&A activity in the next 12 months.

Grant Thornton Transaction Advisory Partner Brent Johnson said M&A in the tech industry surged in the summer of 2020 before other industries followed suit.

“As that segment begins to pick up, it may be the bellwether that suggests that an uptick is coming in other industries,” said Johnson.

However, nearly half, or 47% of respondents, said the constraints in the lending environment caused them to increase the equity component in financings. 

Additionally, 38% said current lending constraints have caused them to explore other alternative financing options.

Amid new Basel III capital requirements, banks are concerned that the amount available to lend will decrease in the coming years. 

“Until that bank lending comes back, private financing is going to remain a pretty strong component of the deal environment,” said Max Mitchell, a managing director in the firm’s Transaction Advisory service line.