M&A Activity Remains Modest, and COVID-19 Will Likely Impact 2020

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Capstone Strategic’s survey reveals that 2019 was a modest year for mergers and acquisitions activity.

Capstone Report - State of Middle Market M&A 2020

“M&A in 2020 will not reach the levels of 2019. The 2019 survey and our own observations indicate that coronavirus (COVID-19) fears will further impact the M&A market" said David Braun, CEO of Capstone Strategic.

Capstone Strategic’s survey reveals that 2019 was a modest year for mergers and acquisitions activity. Even though the number of respondents who engaged in M&A in 2019 dropped (from 52% to 41%) when compared to 2018, most respondents were generally positive and reported growth in their industries. 71% of respondents reported modest growth, similar to 2018 data (73%).

Leaders from various industries generally reported a modest picture of growth and M&A activity according to a new survey by Capstone Strategic, a leading strategic M&A advisory firm for the middle market. The survey was conducted in January and February 2020 and is the seventh annual survey of the market.

M&A activity remained steady in 2019 with most respondents reporting the same level of activity (42%) or more activity (35%) than the previous year. Compared to last year, a greater percentage of respondents are certain they will pursue M&A this year (21% compared to 11%) and a same number of respondents are more than 50% likely to do a deal (26% compared to 27%).

When it came to type of deal structure, outright acquisition continues to be the most popular form of external growth (53%) followed by strategic alliances or joint ventures (26%).

It may be surprising to some, but cost is not the highest barrier to pursuing external growth. Time and attention demanded by the process (34%) and lack of suitable companies to purchase (40%) were the top 2 reasons for not considering external growth.

Looking forward to 2020, we expect the deal levels to be lower than the 2019 levels. Executives are still interested in pursuing forms of external growth and are in general positive, yet cautious about the environment for growth. Concerns about a recession and the impact of COVID-19 are certainly on the minds of some and will likely hamper M&A activity.

“As anticipated from our last survey results, the acquisition activity in 2019 did not reach the 2018 levels,” said David Braun, CEO of Capstone Strategic. “M&A in 2020 will not reach the levels of 2019. The 2019 survey and our own observations indicate that coronavirus (COVID-19) fears will further impact the M&A market. To prepare for a shifting business environment, middle market companies should consider proactively pursuing strategic deals to remain competitive and successful in the future.”

The full survey, State of Middle Market M&A 2020, can be viewed by clicking here.

About Capstone Strategic, Inc.

Capstone Strategic is a leading M&A advisory firm for the middle market specializing in not-for-sale acquisitions and corporate growth strategies. Founded in 1995 by CEO David Braun, Capstone has facilitated over $1 billion of successful transactions in a wide variety of manufacturing and service industries. Capstone utilizes a proprietary process to provide tailored services to clients in a broad range of domestic and international markets. For more information about Capstone and its growth strategy and advisory capabilities, please visit https://www.CapstoneStrategic.com. For timely commentary and insights into the M&A market, please visit the Successful Acquisitions blog at https://www.SuccessfulAcquisitions.net. Capstone can also be reached at 703.854.1910 or Growth@CapstoneStrategic.com.

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Annie Sunny
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