Outlook for M&A turns negative

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Outlook for M&A turns negative

By Mike Troy - 12/17/2018
Rusty Wiley, CEO of Merrill Corp.

Merrill Corporation, a technology provider for global M&A professionals, downgraded its outlook for merger and acquisition activity from positive to neutral after a recent survey of industry executives. The survey, which isn’t exclusive to the retail and CPG world, is a monthly polling of industry professionals asked, “what direction is the M&A market headed?” Respondents are given the choice of positive, neutral or negative.

In the firm’s October 2018 survey, 65% of respondents saw the M&A outlook as positive. In early December, surveying more than 170 finance professionals, the number of respondents who had a positive outlook dropped to 39%, with a neutral outlook taking the lead with 49%.

“The shift to a neutral outlook isn’t surprising,” said Rusty Wiley, Merrill’s CEO. “We believe it’s a caution flag in an environment where the fundamentals are still strong, but market tailwinds are softening. On a positive note, corporate carveouts are on the upswing as large conglomerates look to rationalize assets and current tax rates in the US create incentives for sell-offs.”

Wiley added that private equity activity is also robust, prompted by large amounts of unused dry powder and an active secondary buyout market. However, he cautioned that looming uncertainties around Brexit and other geopolitical shifts, coupled with ongoing tariff disputes and an unpredictable stock market, translate into a less positive outlook for market participants.

In the same December survey, 59% of respondents cited geopolitical concerns as the greatest hurdle currently impacting M&A. Stock market volatility came in second place with 30%.