InSight

Exit and Growth Strategies for Middle Market Businesses

Q4 Engineering & Construction Industry M&A Report

By Catherine Patience | Nov 21, 2014

M&A activity in the Engineering and Construction sector for North American based target companies in Q3 2014 included 67 closed deals according to data provided by S&P Capital IQ.  This is a slight decrease in deal count since Q2 2014, where 72 transactions occurred. Total transaction value increased dramatically between Q2 and Q3 from $565 million to $6.57 billion due to the AECOM purchase of URS Corporation.

Read the Entire Engineering and Construction M&A 4th Quarter Newsletter Here

 


Q4 Energy M&A Update

By Kim Levin | Nov 14, 2014

Oil PumpM&A activity for North American based target companies in the energy sector for Q3 2014 included 117 closed deals and total deal value of approximately over $8.13 billion, according to data provided by S&P Capital IQ. 

Q3 2014 was a quieter period for global oil and gas M&A activity compared to the previous quarter, but this year is still on track to have a greater total M&A spend than 2013. North American activity grew for the fifth consecutive quarter fueled by unconventional oil resource plays in the Permian Basin. M&A activity in the Permian Basin has been on the rise since Q1 2014. For 2014, acquisitions in the Permian Basin made up nearly half of the total E&P deal value in the U.S. and just under a third of total E&P deal value worldwide at around $11.2 billion. North American gas exports, gas assets are also becoming more and more marketable.

Read the Entire Energy M&A 4th Quarter Newsletter Here

 


Q4 Healthcare M&A Update

By Catherine Patience | Nov 07, 2014

HEIPG-PipetteM&A activity for North American based target companies in the healthcare sector for Q3 2014 included 299 closed deals and total deal value of approximately over $14 billion, according to data provided by S&P Capital IQ. M&A Activity in the quarter was down by 11% versus Q2 2014 from 333 to 299 deals closed. The average total deal value also fell by nearly 200% from $379 million to $165 million. 

New data from Frost & Sullivan’s, an industry research group, “Analysis of Mergers and Acquisitions Trends in the United States Healthcare Provider Industry” reveals that M&A deals in the post-acute care, surgical and emergency center segments are expected to drive M&A activity in the U.S. healthcare provider industry. According to the report, the upward trend is also being driven by other factors having a negative impact on healthcare providers’ bottom line. This includes the charges levied on hospitals that get admissions due to hospital-acquired conditions, the Hospital Readmissions Reduction Program that imposes penalties on hospitals with high readmission rates, and value-based purchasing that ties hospitals’ performance to reimbursement rates for Medicare patients.

Read the Entire Healthcare 4th Quarter Newsletter Here

 


Q3 Transport, Logistics and Supply Chain M&A Update

By Kim Levin | Oct 31, 2014

TLIPG-Rail TunnelM&A activity in the Supply Chain and Logistics sector for North American based target companies in Q2 2014 included 44 closed deals according to data provided by S&P Capital IQ. The average deal value was $74 million with an average enterprise value to revenue multiple of .79.

Overall valuations are modest for several reasons. First, transportation deals are cyclical and have already passed the high peak after the low from the recession. Another contributing factor is the horizontal consolidation of smaller trucking companies as opposed to transactions involving more costly modes like airlines and rail.

Read the Entire Transport, Logistics and Supply Chain 3rd Quarter Newsletter Here


The Art of Corporate Inversions

By David DuWaldt | Oct 27, 2014

Tax PendulumHave you ever heard of a “Double Irish?” To some readers, this term may sound more like a stiff drink. Perhaps the tax lawyers and accountants that serve multinational corporations are becoming more like bartenders by preparing the kind of “drinks” their customers really desire.

The Double Irish is a tax avoidance arrangement involving two Irish registered companies. The structure is quite effective for companies with valuable intellectual property rights and it has been commonly used by large technology and pharmaceutical companies. The structure involves the payment of royalties and fees between controlled entities for the use of intellectual property rights. One of the Irish companies is offshore and located in a tax haven such as Bermuda or the Cayman Islands and holds non-U.S. intellectual property rights. The other company is based in Ireland. The entity based in Ireland pays royalties and fees to the entity in the tax haven thereby reducing taxable income. The left over profits for the entity based in Ireland are taxed at the rate of 12.5%. Now compare the foregoing structure to a plain vanilla C corporation based in the United States, with taxable income above $18,333,333, thereby paying income tax at the rate of 35%, plus any applicable state and local taxes. Read more »


Q3 Technology, Media & Telecom M&A Industry Report

By Catherine Patience | Oct 24, 2014

ITIPG-BinaryM&A activity for North American based target companies in the Technology, Media and Telecom sector for Q2 2014 included 750 closed deals, according to data provided by S&P Capital IQ. Industry insiders believe M&A activity in the sector for the remainder of 2014 will continue to increase, according to a survey released June 5 by international law firm Morrison & Foerster LLP and tech research firm 451 Research LLC. The report polled 157 C-level and business development executives, general counsel, as well as VC and private equity figures in the Technology, Media and Telecom. Approximately 72 percent of respondents, polled in mid-April, said they planned shift focus toward M&A activity through the end of the year, up from 50 percent last November.  Cash on the balance sheet for strategics and good financing conditions for LBO transactions in addition to a desire for growth through acquiring new technologies were cited as factors that should  M&A. Only 4 percent of those polled expect activity to decrease, the report said.

Read the Entire Technology, Media and Telecom 3rd Quarter Newsletter Here

 


Q3 Plastics & Rubber M&A Industry Report

By Kim Levin | Oct 17, 2014

granulesM&A activity for North American based target companies in the plastics and rubber sector for Q2 2014 included 20 closed deals and total deal value of approximately $2.65 billion, according to data provided by S&P Capital IQ. This is a 20 percent decrease in the number of deals since Q1 2014, but a large increase in deal value compared to the $340 million deal volume in the previous quarter.

Read the Entire Plastics & Rubber 3rd Quarter Newsletter Here


Q3 Metal Fabrication M&A Industry Report

By Catherine Patience | Oct 10, 2014

MFIPG-Metal PartM&A activity in the metal fabrication sector for North American based target companies in Q2 2014 included 16 closed deals, according to data provided by S&P Capital IQ. The deal environment in the metal sector has rebounded over a slow first quarter, according to a report from international consulting firm PricewaterhouseCoopers. As smaller machine shops struggle to stay viable, operators with strong cash reserves are likely to take advantage by buying up assets and using scale to focus productivity on higher-margin capacity.

Read the Entire Metal Fabrication M&A 3rd Quarter Newsletter Here


Q3 Aviation, Aerospace & Defense M&A Industry Report

By Kim Levin | Oct 03, 2014

Nose WheelM&A activity in the North American Aerospace and Defense sector for Q2 2014 included 29 closed deals according to data provided by S&P Capital IQ. Total deal value soared to $443 million, while average deal value reached $44 million. High deal value is largely attributed to several mega deals, the largest being The SI Organization’s $215 million acquisition of QinetiQ North America. Three additional deals, valued at more than $60 million added to the high deal value of the quarter.

Aerospace M&A remains robust with volume expected to match the record high set in 2013. However, deal making on the defense side has not been as strong.

Read the Entire Aviation, Aerospace & Defense M&A 3rd Quarter Newsletter Here


Good News for Middle Market Business Sellers

By Catherine Patience | Oct 01, 2014

Middle Market PulseGF Data is out with their Mergers & Acquisitions Report for the second quarter of 2014 and in some ways, it’s status quo and in other ways, not so much. With a scarcity of quality companies for sale and an abundance of both lending capital and investable funds, the tale of the tape is a little bit different this period.  Valuations remain consistent with those of Q1, but debt levels have never been greater and a there is a new “look” to the companies that investors are stocking in their portfolios.

As we have mentioned in previous months, a high percentage of companies that have been acquired since 2003 have been “best in class” businesses. These are characterized by above average EBITDA margins and revenue growth.  Over the life span of GF Data’s deal sample, 57% of all total deal activity has involved above average quality companies.  However, year to date those figures are at 40%, either signaling an anomaly in the chart or a changing of the guard.

If this is indeed a changing of the guard, this is a good sign for middle market business owners who either have been on the market or are considering a sale. Financial investors constantly face the dilemma of needing to put their money to work while mitigating as much risk as possible.  Best in class companies foot this bill.  But with a scarcity of those companies in the market, they must be finding a way to consider less than perfect candidates.  Data has shown that smaller “add-on” deals have become more popular during the post-recession recovery.  It is possible that additional relaxed standards have also been adopted leading to a wider pool of potential target companies.  If this is the case, this signals a positive trend for middle-market sellers.

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