After slowly increasing the last two years, confidence in the US M&A market has dropped slightly, according to the 2011 M&A Outlook Survey from law firm Dykema, which found that just 26 percent of industry leaders believe the market will be strong during the next 12 months, down from 38 percent last year, while 57 percent are neutral on the outlook.

Looking at the overall US economy, nearly half of respondents are neutral on the prospects for 2011, but for the second consecutive year, respondents have a more pessimistic outlook compared to the previous year.

“Given the drastic economic shifts of the past 24 months, it is not surprising that corporate executives are somewhat less confident than a year ago,” says Dave Cellitti, leader of Dykema's M&A practice. “However, more than half of the survey’s respondents expect to be involved in at least one transaction in the coming year, so they have good reason to keep a close watch on the M&A market.”

Respondents believe that availability of capital (39 percent) is the biggest driver for current M&A activity, due in large part to strategic buyers and private equity firms with greater access to financing. However, an uncertain economy has been the most frequent obstacle to successful deals during the past year, and as a result, over half of the respondents think the coming year will bring an increase in the number of distressed transactions.

China, Europe, India and Canada are named the most likely regions for foreign buyers in the US. M&A market over the next year. Respondents continue to look at China as the principal source for investors in US companies, far outranking any other region. Interestingly, Europe is named the second most likely region for US investment despite the current economic turmoil.