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Survey: Bullish M&A Outlook After Record Year

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Survey: Bullish M&A Outlook After Record Year

Optimism somewhat tempered by global economic uncertainty, driving increased focus on core assets and strategy.

Following the biggest dollar year ever for mergers and acquisition transactions in 2015, an overwhelming 87% of executives at US corporations and private equity firms predict their organizations' deal volume will continue, or even increase in 2016, according to a survey by professional services firm Deloitte. This positive market sentiment is despite the 40% drop in US deal volume in the first quarter of 2016, compared to the first quarter of 2015. 

That lackluster start to the year, however, likely helped identify ongoing areas of concern for survey respondents. Global economic uncertainty (32% of corporate respondents, 26% of private equity respondents) was ranked most likely to impact deal pursuit, financing and closing in the next 12 months. For the first time in the history of the survey, economic conditions also ranked as most important determinant of deal success among both corporate executives and private equity respondents.

Seeking smaller strategic deals remains the No. 1 M&A strategy for corporate respondents in the coming year for the third year in a row.

Notably, few respondents (14% of corporate respondents, 16% of private equity respondents) ranked the 2016 US elections as most likely to influence deal making in the coming year. 

"While still decidedly bullish on the M&A market for 2016, the results also show some creeping issues that could temper this optimism," said Russell Thomson, managing partner of Deloitte's US merger and acquisitions services practice. "For example, although half of private equity investors anticipate an increased number of deals this year, that's notably less than the 61% that foresaw an increase in activity in our 2015 survey. The first quarter's numbers for deal flow indicate that despite a continued focus on M&A, both corporate and private equity executives may have taken more time to gauge opportunities, assessing the economic climate and other factors before making their moves."

This year's survey results revealed increases in smaller strategic deals and divestitures, as well as continued appetite for cross-border opportunities, and the use of data analytics.

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