What’s Ahead for Mergers and Acquisitions in 2020

December 31, 2019

Deal-making, often, is the quickest route to building the valuable optionality companies need to proactively respond to annual challengers. As global economic expansion continues, the current mergers and acquisitions cycle has lasted much longer than normal cycles.

As companies utilize divestments to access capital for acquisitions, approximately 52 percent of business decision makers are planning to pursue mergers and acquisitions within the next 12 months. Deal closures tend to follow similar patterns as wider deal markets — and company pipelines, in general, are increasing.

Every month, more companies reinvent their business models to meet the demands posed by today’s competitive landscape, and a wide array of deal options will be on the table in 2020. To understand the upcoming year’s overall outlook, it’s important to examine the most impactful M&A trends of our current year as it comes to a close.

Mergers and Acquisitions in 2019

2019 was a big year for M&A activity. Between a relaxed US regulatory climate, tax reform and expanding cash reserves fueling US dealmaker optimism, many believe this activity won’t slow down. This year, about 79 percent of business owners expect a closed deal rate increase in upcoming months.

A Dealmaking Activity Downturn

Dealmaking returns throughout 2019’s economic cycle reflected a general M&A activity downturn. Yet downturns can be used resourcefully for deal preparation, decision making and execution. The year’s decreasing M&A activity followed a sharp activity downturn in 2018 — and many dealmakers needed to cope with decreased valuations, higher equity market volatility and macroeconomic uncertainty.
For the first time since 2011, public target acquirers had negative cumulative abnormal returns — yet global M&A value still increased despite a lowering volume.

M&A Value Stabilization

Despite 2018’s rough foundation establishment for 2019, global M&A value still increased moderately, a 7-percent global value increase over a five-year average.
2019’s initial “fast start” can be attributed to a flood of megadeals. In the first half of 2019 alone, M&A value stabilized to meet the long-term average. This value rebound was further propelled by higher levels of North American dealmaking in general — particularly in the second quarter.

A Focus on Customer Base Expansion

The deals of 2019 emphasized consumer population growth, taking a more traditional approach to expansion via product and service diversification. This shift away from technology plays reflected organizational intentions to take advantage of domestic policies, and plenty of decision makers found restored optimism in 2019’s later months.

Global M&A in 2020

Despite remaining fears about M&A slowdown, today’s companies still look to M&A to navigate potential growth barriers. Mergers and acquisitions intentions remain above the long-term average — a result of more companies transforming their portfolios. Many companies are also utilizing divestments to unlock acquisition capital requirements, yet an increased deal option breadth has created a wary outlook of 2020.
Valuation levels are still challenging, the pressure placed on startups to adopt existing business models is increasing. Digital strategy also comes into play, further highlighting M&A as the quickest route to maximize transitional capabilities.

Scott-Macon New York: Your Leading Transactions Partner

2020’s business climate will host many opportunities to identify, analyze and execute the emergent corporate strategies geared towards business expansion. Despite initial wariness of 2020’s growth prospects, domestic and international company purchasing and selling opportunities are steadily increasing.

The professionals of Scott-Macon New York have the experience needed to help its clients navigate this year’s M&A climate. Covering a broad range of industries, the firm has successfully closed transactions for family business, private equity firm and large company trading alike. Contact the professionals of Scott-Macon to redefine your strategy, and make the most of 2020’s M&A opportunities alongside the most effective transaction experts available today.

Contact us about getting a fairness opinion for your business transaction.