The following insight is a contribution from TriState Capital, a Thought Leaders Council member of the Family Office Exchange.

Let’s look at the overall economy so far in 2013. We have:

• A soaring stock market
• A housing market that is recovering
• Declining unemployment
• GDP growth
• Favorable credit markets

These factors seemed awfully far out of reach a few years ago; yet the economy has continued to experience a positive recovery, and, barring continued turmoil in Washington, will continue to do so. 

So who has the answer to the $64,000 question: Why is deal activity in the middle market down?

If the above data were negative, the answer would be simple. But deal activity through at least the second quarter of 2013 continues to remain soft in spite of positive economic data. 

Through 2013, middle market companies continue to lack confidence in the deal market, citing ongoing economic uncertainty, and weaker performance when compared to pre-crisis levels.  If one couples this with ongoing tax uncertainty and few attractive options to park sale proceeds, you get a stalemate.

Despite the tug-of-war between the data and the reality, there are several reasons to think that robust deal activity is right around the corner:

1. The economy continues to grow. Annualized real GDP grew at 2.5% in the second quarter of 2013. This was primarily driven by personal consumption, non-residential fixed investment and exports of goods and services.
2. A cyclical market inevitably means company performance will return to or exceed pre-crisis level.
3. There are large cash balances on U.S. corporate balance sheets due to the recent focus on liquidity, as well as conservative bond yields and a potential drop in the stock markets.
4. Lower U.S. energy costs, fueled in part with the production of shale gas.
5. Private equity fund capital commitments that will need to be invested soon.

All of these factors suggest it will only be a matter of time before we experience a busy season in the M&A market.

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About Dave Molnar

Dave Molnar serves as President, Commercial Banking, where he is responsible for TriState Capital’s Commercial & Industrial and Commercial Real Estate sales efforts throughout its markets. Prior to this, Dave served as Regional President of TriState Capital Bank’s Western Pennsylvania operation where his responsibilities included managing the business development opportunities of the relationship management team in Western Pennsylvania. With more than 30 years of banking experience, Dave has spent much of his career coordinating business development efforts, serving as a team leader and increasing middle market loan production in the Pittsburgh region.