MoFo Survey: Dealmakers Offer Brightest M&A Forecast in Four Years

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Tax changes help fuel positive sentiment for deal activity, though there are concerns about increased scrutiny from CFIUS and trade disputes

Morrison & Foerster, a leading global law firm, today announced the results of its semi-annual Tech M&A Leaders’ Survey, in which dealmakers offered their most positive forecast for tech M&A in four years. Despite a slow start to 2018, two-thirds (66%) of survey respondents expect an increase in deal volume, the highest level since April 2014.

The report found that 65% of survey respondents believe the Tax Cuts and Jobs Act of 2017 will ultimately bolster overall dealmaking in 2018. This finding helps at least partially explain the discrepancy between dealmakers’ optimistic outlook and the number of tech deals through the first quarter of 2018 coming in at 815, the slowest start to a year since 2013 (source: 451 Research’s M&A KnowledgeBase).

“It is clear that dealmakers remain bullish about the prospects for tech M&A this year,” said Robert Townsend, co-chair of Morrison & Foerster’s Global M&A Practice Group. “This rosy forecast from our survey respondents can be attributed to changes in U.S. tax law at the end of 2017. The majority of dealmakers clearly believe that lower corporate tax rates will free up cash for M&A while making target companies more attractive.”

Additional key findings, takeaways, and analysis from the Tech M&A Leaders’ Survey include:

Other government policies could negatively impact U.S. tech targets

Beyond taxes, other government initiatives could weigh on acquisitions of U.S. tech targets. Of particular note, the survey found that 54% of respondents believe increased scrutiny from the Committee on Foreign Investment in the United States (CFIUS) will deter dealmaking. Respondents provided their most dismal cross-border forecast for China-based buyers targeting U.S.-headquartered companies, with 65% of respondents expecting China-U.S. acquisitions to decline. According to the 451 Research M&A KnowledgeBase, the value of such deals fell in 2017 to just $500 million from $11.5 billion a year earlier.

Dealmakers are also worried about trade disputes, with 51% of survey respondents expecting the current dynamic to deter M&A activity. Similarly, 49% of respondents think antitrust concerns could negatively impact dealmaking.

Outlook for Private Equity acquisitions remains high but dampens slightly

After Private Equity (PE) had its busiest ever first quarter according to 451 Research’s M&A KnowledgeBase, 47% of survey respondents expect there to be a continued increase in PE spending, compared with just 13% forecasting a decrease. Sentiment has, however, slightly dampened since the previous Tech M&A Leaders’ Survey was released in October 2017 when a clear majority of respondents (59%) expected PE spending to rise.

While slightly fewer dealmakers predict an increase in new PE acquisitions, more survey respondents forecast a smoother path to exit for portfolio companies as enterprises ramp up their shopping. Almost half (48%) expect a favorable exit environment for PE over the next three years, whereas in the previous survey, almost as many (45%) predicted an unfavorable environment. Sixty-four percent of respondents anticipate that sales to strategic acquirers will increase this year, second only to exits via IPO, for which 49% of dealmakers predict an increase.

Changes to U.S. tax laws are expected to be better for strategic M&A than Private Equity

Another factor accounting for the slightly dampened outlook for PE deals is the expected impact of the Tax Cuts and Jobs Act of 2017. Less than half of survey respondents (47%) expect the tax reforms to help increase PE deals, compared to 66% who expect it to boost corporate M&A and sponsored deals.

Furthermore, lower corporate tax rates could potentially decrease valuation sensitivity among M&A strategics and enable them to win deals from PE firms. Forty-six percent of survey respondents shared that outbidding from PE firms has been a strong factor in the decline of strategic M&A.

Outlook is optimistic for unicorn debuts

In the wake of successful IPOs from Dropbox, Spotify and Pivotal, more unicorn debuts are expected to follow. The survey found 48% of survey respondents expect that, on average, unicorns will end their first day of trading above their previous post-money valuations, while 43% expect they will fall. Additionally, 30% of overall respondents believe unicorns will finish their first session on the street up 10% or more from their private valuation, while just 19% predict they will decrease by that same level.

Find out more about the survey results here.


Now in its 13th edition, the M&A Leaders’ Survey from 451 Research and Morrison & Foerster drew 128 responses, primarily from corporate or M&A executives (47%) and investment bankers (35%), with the remaining responses coming from lawyers, VCs, PE professionals, and others in the M&A community. Roughly 80% of the responses were from dealmakers and advisers based in the U.S., with Silicon Valley representing the largest single location.


We are Morrison & Foerster — a global firm of exceptional credentials. Our clients include some of the largest financial institutions, investment banks, Fortune 100, and technology and life sciences companies. The Financial Times has named the firm to its lists of most innovative law firms in Northern America and Asia every year that it has published its Innovative Lawyers Reports in those regions. In the past few years, Chambers USA has honored MoFo’s Corporate/M&A team with a client service award, its Privacy and Data Security, Bankruptcy, and IP teams with Firm of the Year awards, and the firm as a whole as Global USA Firm of the Year. Our lawyers are committed to achieving innovative and business-minded results for our clients, while preserving the differences that make us stronger. The firm also has a long history of commitment to the community through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education for poor children, advocating for veterans, promoting international human rights, winning asylum for the persecuted, and safeguarding the environment.

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Radley Moss
Morrison & Foerster
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