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Report: 93% of US companies pursuing an acquisition plan to do so outside of their own sector

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Report: 93% of US companies pursuing an acquisition plan to do so outside of their own sector

83% of all deals expected to be middle market.

An overwhelming majority of US Executives (93%) pursuing  an acquisition plan to do so outside of their own sector, according to a recently-released semiannual study by professional services firm EY.

The survey also finds that, despite some uncertainty on the horizon in the global economy, 74% of US executives indicate that they plan to pursue a deal sometime in the next year, and 88% expect stability in the domestic M&A market. 

While upper-middle-market deals (between US$250 million and $US1 billion) are expected to increase, the majority of deals, 83% are still expected in the middle market (under $250 million).

Pipeline growth remains steady as all US executives surveyed are maintaining or growing the number of targets in their pipelines. 80% of companies have either two or three deals in the pipeline. While upper-middle-market deals (between US$250 million and $US1 billion) are expected to increase, the majority of deals, 83% are still expected in the middle market (under $250 million).

"On the heels of a prolonged phase of industry shaping megadeals, the US market is experiencing healthy and sturdy levels of dealmaking confidence," said Rich Jeanneret, EY Americas Vice Chair, Transaction Advisory Services. "After two years of heightened valuations, prices are finally starting to come back down to earth; 77% of executives are now calling the valuation gap 'small,' and that is a positive indication that an increase in deal activity lies ahead."

Top sectors for US dealmaking   
In the US, diversified industrial products, consumer products and retail, automotive and transportation, real estate and life sciences are expected to be the most acquisitive over the next 12 months. A desire to establish inorganic growth to buffer against any potential economic downturn is a main driver of deal activity. To further underscore US executives' tempered outlook, respondents said that on average they are allocating more than half of their available capital to reduce their debt and to shore up their balance sheets. This amount is more than organic and inorganic growth, and shareholder cash deployment, combined.

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