Dealmakers See Mid-Market Activity Increasing
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Dealmakers See Mid-Market Activity Increasing

acg ny nf1According to an annual survey conducted by the New York chapter of the Association for Corporate Growth, a majority of middle market deal making and corporate professionals believe that middle market transaction activity will increase, despite unsustainable valuations. The survey is based on responses from more than 200 ACG New York members who are leading dealmakers in the middle market.

The recently conducted survey found that the nearly two thirds (64 percent) of respondents believe there will be an increase in middle market transaction activity through the remainder of 2014 and into the first quarter of 2015. Nearly three quarters of respondents (74 percent) believe that deal flow remains strong and that the uncertain tax environment is neither inhibiting transactions nor making sellers reluctant to sell their businesses.

Regarding private equity returns, the survey also found that more than half of respondents (56 percent) predict that middle-market private equity returns will outperform small capitalization public equity returns over the next three to five years.

Martin Okner nf1According to Martin Okner, Chairman of ACG New York, private capital is vitally important to the health of the US economy.  “Middle market businesses employ over 44 million people in the U.S. and represent nearly a third of U.S. GDP.  They are the bread and butter of the United States’ economy and private capital is their growth engine. From 1995 through 2010, private capital-backed companies grew jobs by 64.4 percent, while all other companies in the U.S. economy grew jobs by 18.3 percent.  Our survey demonstrates confidence that private capital investments into the middle market will continue to drive sales and job growth throughout this decade in the U.S. and generate long-term returns for investors.”

On the subject of middle-market valuations, more than half of respondents (53 percent) believe that businesses currently selling are achieving reasonable valuations, but that these valuations are not sustainable. More than 45 percent believe that high valuations are mostly a result of a too much capital chasing fewer quality deals.  Additionally, 47 percent of those polled maintain that there is a disconnect between buyers and sellers when it comes to valuations, but that the gap is closing.

When polled about what industries professionals believe will achieve the highest level of deal flow for the balance of 2014 and into 2015, 39 percent of survey participants answered technology, with healthcare polling at 37 percent and oil & gas at 28 percent.

This survey was conducted online and at ACG New York events on behalf of ACG New York between September 24, 2014 and October 1, 2014. There were a total of 218 participants. If you are interested in receiving full survey results please contact: acg@kcsa.com.

ACG New York, the founding chapter of The Association for Corporate Growth, is the largest association of middle market deal making and corporate professionals in New York, with more than 1,000 members across all industry sectors (www.acg.org/nyc).

2014 PEPD • Private Equity’s Leading News Magazine • 10-17-14

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