U.S. execs see M&A staying steady; N.J. remains popular spot

American executives expect mergers and acquisitions activity to remain steady over the next year, as companies work through a spate of recent deals, according to a new survey from EY.

Ernst & Young LLP’s semiannual Capital Confidence Barometer found that 73 percent of U.S. executives see domestic M&A staying stable over the coming 12 months, with a majority remaining confident that U.S. economic indicators will continue their upward trend.

New Jersey remained a popular place for deals, as the tax, transaction and advisory firm told ROI-NJ that the number of transactions targeting a Garden State company grew 12 percent in the third quarter of 2017 from the second quarter, and the total number of deals where both the buyer and the target are located in the state was up 22 percent year-over-year in Q3.

“The New Jersey M&A market is heavily focused on pharma and life science companies buying strategic bolt-on acquisitions and selling noncore assets,” Rich Jeanneret, EY Americas vice chair and Ernst & Young LLP regional managing partner for the Northeast Region, told ROI-NJ. “Outside of pharma and life sciences, New Jersey companies are in line with broader market trends where strategic acquisitions that will drive growth and help align companies with changing market dynamics, particularly within (information technology) and consumer product companies, remains of critical importance to the C-suite.”

Additionally, the total value of New Jersey deals is up 10 percent over the year-ago quarter.

Meanwhile, EY said 42 percent of the U.S. executives surveyed plan to pursue some kind of transaction. That represents a more normalized level when compared with the past two years’ record high intentions, it added. Large companies remain particularly eager to deal, however, with a 74 percent intention rate.

Over the survey’s eight-year history, intentions have averaged 52 percent, ranging from 23 percent to 79 percent.

“After the dealmaking boom of the last two to three years, we find executives turning their attention to maximizing the value of recent transactions, while also weighing the uncertainty in Washington on tax reform and deregulation,” Bill Casey, EY Americas vice chair, transaction advisory services, said in a prepared statement. “We do not necessarily see this as a long-term shift in dealmaking, but rather a potential tactical pause.”

The ongoing deal trend is also reflected in corporate portfolio reviews, the survey said. EY said 49 percent of those surveyed said they review their portfolios at least annually, while 50 percent are doing so more frequently.

“The C-suite is closely monitoring disruption with how companies interface with consumers to reduce friction and provide optionality in how products are brought to market,” Jeanneret said. “Pressure continues on traditional business models as executives look to pivot quickly through acquisitions.”

The survey also found that 63 percent of execs see corporate earnings improving and 58 percent seeing a positive stock market outlook.

EY added that the U.S. remains the top transaction destination, with Canada second. China, meanwhile, passed the U.K. for the No. 3 spot.