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RBS Citizens survey finds increasing focus on M&A among middle market companies

Survey of companies involved in corporate development shows nearly 80 percent of mid market firms are actively pursuing or open to making acquisitions in 2013

BOSTON (January 23, 2013) – Nearly 80 percent of middle market companies active in corporate development are pursuing acquisitions now or are open to making acquisitions in 2013, according to an RBS Citizens survey released today.

Asked to identify specific corporate development activities they are currently involved with or planning for the year ahead, companies reported the following:

  • Making a significant acquisition (79 percent)
  • Reinvesting retained earnings (74 percent)
  • Establishing new partnerships, joint ventures or alliances (73 percent)
  • Raising capital (62 percent)
  • Being acquired or merging with another firm (38 percent)

The survey indicates that firms expect to undertake an average of more than three corporate development activities in 2013.

“The strong interest in acquisitions revealed in this survey shows that middle market companies are very busy evaluating acquisition opportunities and will continue to be so in 2013,” said Bob Rubino, Executive Vice President and Head of Corporate Finance and Capital Markets at RBS Citizens. “Clearly, top line revenue challenges and low economic growth rates, coupled with historically low interest rates, are leading many companies to see acquisitions as important to their growth strategies.”

RBS Citizens, in partnership with Cogent Research, conducted the survey of 330 middle market companies in New England, Mid-Atlantic and Midwest states between September 17 and October 18, 2012. Survey respondents were business executives directly involved in the decision-making process related to corporate development, including owners, CEOs, presidents, CFOs, COOs, partners, principals and directors. The survey has a margin of error of +/- 5.4%. For the purpose of this report, middle market refers to companies with revenues between $5 million and $2 billion.

Other key findings of the RBS Citizens survey include:

Optimism about the future of the M&A market is high:

  • More than 50 percent of respondents anticipate that the environment for raising capital and seeking outside investment will improve over the next twelve months.
  • More than 50 percent of mid-market executives also believe today’s prices will remain stable, while more than 33 percent believe they will increase.

Interest in acquisitions is widespread:

  • Of the 79 percent of mid-market firms currently engaging in or open to making acquisitions, 24 percent are currently involved in the process of making an acquisition.

Financing is available:

  • Businesses indicate they have or can readily acquire the means to make a deal happen. Middle market firms making or looking to undertake an acquisition anticipate that their deals will be funded with equal parts cash (35%) and debt (35%) with a slightly smaller share of equity (30%).

Many sellers are interested but not actively looking for buyers:

  • Interest in selling is significant, with 31% percent of middle market firms open to being fully or partially acquired by an outside investor. At the same time, only 7% percent of firms are actively seeking buyers.

Many would-be sellers are unsure of their value:

  • 41% of current or potential sellers said being underpaid or undervalued is their top concern, especially among smaller firms with between $5 million and $25 million in annual revenue.

To download the full middle market M&A survey, please visit:
http://www.citizensbank.com/pdf/MA_Outlook_2013.pdf

About RBS Citizens Financial Group, Inc.
RBS Citizens Financial Group, Inc. is a $129 billion commercial bank holding company. It is headquartered in Providence, R.I., and through its subsidiaries has more than 1,400 branches, approximately 3,700 ATMs and approximately 18,940 colleagues. Its two bank subsidiaries are RBS Citizens, N.A., and Citizens Bank of Pennsylvania. They operate a 12-state branch network under the Citizens Bank brand in Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont; and the Charter One brand in Illinois, Michigan and Ohio. RBSCFG has non-branch retail and commercial offices in more than 30 states. RBSCFG is owned by RBS (the Royal Bank of Scotland Group plc). RBSCFG’s website is citizensbank.com.