01/13/2015
Citizens Commercial Banking’s latest Middle Market M&A Outlook shows a warming economy – and the retirement plans of baby boomer owners – driving deal strategy in 2015
25% of mid-market companies are in the process of acquiring another firm, and nearly half of larger mid-market companies are actively buying
Seven in 10 mid-market business owners call their retirement date a key factor in deciding when to sell
BOSTON – Citizens Commercial Banking’s fourth annual Middle Market M&A Outlook released today shows corporate buyers are no longer content to “sit on the fence” as an improving economy has given executives more reasons to either make strategic acquisitions or stay the course and focus on organic growth.
A quarter of the middle-market executives surveyed said their firms are currently involved in acquiring another firm, up from 17 percent last year. For middle-market companies with annual revenue between $100 million and $2 billion, the percentage is even higher: 46 percent are involved in a purchase, compared to 30 percent last year.
As for sellers in the middle market, they reported a new strategic factor: the retirement plans of baby boomer business owners. Seven in 10 business owners consider their targeted retirement date a “key factor” in determining the timeframe for selling.
“Our 2015 survey indicates that the appetite for acquisitions and sales has increased since last year,” said Bob Rubino, Executive Vice President and Head of Corporate Finance and Capital Markets for Citizens Commercial Banking. “Many owners are looking for strategic acquisitions that can help them grow. Buyers are no longer sitting on the fence. This is consistent with what we’ve seen with the increasing number of Citizens Commercial Banking customers that currently are actively engaged in M&A activity.”
The Citizens Commercial Banking Middle Market M&A Outlook 2015, now in its fourth year, provides insight into the behaviors, attitudes and perceptions of executives as they consider their corporate development strategies for the year ahead. Other key findings from this year’s survey include:
- Many executives believe that the market is shifting in the favor of sellers.
- Once-passive buyers have reached a tipping point and are ready to make a decision either to buy now or hold off on M&A activities for at least a year.
- Buyers and sellers both are focused on the impact a transaction may have on employees. The improving economy means key employees have more opportunities to switch jobs during or after a transaction.
- Commercial banks continue to be the most trusted M&A partner to management.
- The main reason for making an acquisition – cited by 73 percent of companies – is to increase revenue.
- The top two reasons for selling are to provide liquidity to owners (47 percent) and to take advantage of the market value of the firm (45 percent).
- The top reasons for considering international M&A are: access to new markets (40 percent), lower operating costs (40 percent) and lower labor rates (36 percent).
State of Raising Capital:
The percentage of middle-market companies currently raising capital is up from last year with the largest increases coming from companies with revenues above $25 million.
· A quarter of middle-market companies are actively engaged in raising capital, while another 40 percent are looking for opportunities to do so.
· Companies seem to be taking advantage of continued low interest rates, which they feel will rise eventually.
· Middle-market executives feel confident about their ability to raise the desired capital and are bullish about market trends: 60 percent expect the market for raising capital and seeking outside investment to improve in 2015.
· The top reasons for raising capital are: capital expenditures (51 percent) and for acquisitions or to make the company more attractive to buyers (39 percent).
The Trusted Advisor:
When looking for a third-party partner for assistance during an M&A transaction, both buyers and sellers look for a firm with in-depth industry knowledge as well as financial, legal, intellectual property and accounting expertise.
· Among buyers, commercial banks continue to be the most widely used partner, used by 32 percent of business leaders actively engaged in or currently pursuing a purchase.
· Commercial banks are also the preferred partner of firms raising money.
· Buyers, sellers and firms raising money all agree that commercial banks are the most highly skilled partner when it comes to corporate development.
Formerly known as RBS Citizens, Citizens Commercial Banking is the commercial banking division of Providence, R.I.-based Citizens Financial Group. For more information about Citizens Commercial Banking, go to citizensbank.com/commercial. For a copy of this year’s survey, please go to Middle Market M&A Outlook 2015.
Survey Methodology:
In late 2014, Citizens Commercial Banking conducted a survey of 469 U.S.-based middle- market business executives who are open to or currently engaged in some form of corporate development activity, including mergers, acquisitions, and raising capital in the New England, mid-Atlantic and Midwest regions. For the purposes of this survey, middle market businesses are defined as private or public companies with annual revenue between $5 million and $2 billion.
About Citizens Financial Group, Inc.
Citizens Financial Group Inc. is one of the nation’s oldest and largest financial institutions, with $131.3 billion in assets as of September 30, 2014. Headquartered in Providence, Rhode Island, the company offers a broad range of retail and commercial banking products and services to individuals, small businesses, middle-market companies, large corporations and institutions. Consumer Banking helps its retail customers “bank better” with mobile and online banking, a 24/7 customer contact center and the convenience of approximately 3,200 ATMs and approximately 1,200 Citizens Bank and Charter One branches in 11 states in the New England, Mid-Atlantic and Midwest regions. Citizens also provides mortgage lending, auto lending, student lending and commercial banking services in selective markets nationwide. Citizens Commercial Banking offers corporate, institutional and not-for-profit clients a full range of wholesale banking products and services including lending and deposits, capital markets, treasury services, foreign exchange and interest hedging, leasing and asset finance, specialty finance and trade finance.
Citizens operates via subsidiaries Citizens Bank, N.A., and Citizens Bank of Pennsylvania. Additional information about Citizens and its full line of products and services can be found at www.citizensbank.com.
