Though technology, media and entertainment, and telecommunications (TMT) executives expect the robust M&A market to continue, many have moderated their near-term dealmaking plans, according to our latest Capital Confidence Barometer. After the high levels of activity seen in recent quarters, fewer TMT companies (42%) now plan to actively pursue M&A in the next 12 months — down from 51% in April 2018 and slightly below the 44% long-term average across all sectors. Merger and acquisitions intentions trended lower within the technology and telecommunications sectors, and stayed roughly flat in media and entertainment.
Still, transformative deals continue — in fact, many serial acquirers have returned to the markets in the last few quarters. Notably, near-term M&A plans are much higher among companies with revenues over $1 billion (65%), which typically can allocate more resources to ongoing M&A activity, than for companies with revenues below $1 billion (23%). Fast-changing regulatory and political headwinds are causing some companies to pause their dealmaking and assess the potential impact and redouble lobbying efforts.
Market optimism remains high. Overall, TMT executives remain extremely positive about the M&A outlook, with 99% expecting the market to improve or remain stable over the next 12 months. That confidence is bolstered by strong economic indicators; the vast majority of executives believe that economic growth, corporate earnings, and equity valuations will improve or remain stable. The rationale for M&A is as compelling as ever: executives view dealmaking as the most effective way to quickly expand into new markets, adjust to changing customer behavior, and acquire key talent in a tight labor market.