InSight

Exit and Growth Strategies for Middle Market Businesses

Second Half of 2016 – Marked Increase in M&A Activity

By Kim Levin | Oct 13, 2016

Marked Increase in M&A ActivityAccording to data published by international financial data tracker Bureau Van Dijk, North American deal volume and value declined significantly during the first half of 2016 following the global trend. According to Bureau Van Dijk, there were 12,298 transactions completed in H1 2016 (a decline of 17.3% over H2 2015) with a combined value of $692.5 billion (a decline of 41.3% over H2 2015). During H1 2016 the U.S. saw 10,147 US deals worth a combined $633.4 billion. Canada saw 2,152 deals worth$59.9 billion.

Private Equity

Falling in line with general M&A trends, North American private equity and venture activity also slowed on the value and volume fronts. Private equity and venture investors took part in 6,487 deals in the region worth $120.8 billion. In contrast, H2 2015 saw 7,792 deals worth $262. 6 billion invested in the second half of 2015.

Sector Activity

Sectors that saw the most activity were metals/metal products (981 deals) followed by general capital machinery (799 deals) and publishing/printing (791) deals.

Deal Leverage

Senior debt rates for the first half stayed relatively steady with a debt-to-EBITDA ratio of approximately 3.0x. The number shows there is still a hearty appetite for lenders to private capital for M&A and other capital expenditures.

2016 H2 Outlook

According to data from international accounting firm Ernst and Young, the second half of 2016 should show a marked increase in M&A activity while not quite reaching the fervor of 2015. The spike is expected to be driven by stability in both the debt and equity markets. In addition, many sellers may be looking to exit prior to the end of 2016 as a new administration prepares to lead the United States.

On the public markets, the second half of 2016 is projected to continue at strong clip with the bulk of the fallout from Brexit in the rearview. However, uncertainty still permeates Europe and the election cycle stateside could cause some volatility. IPO activity should continue to pick up piggybacking the recent success of companies like Twilio (TWLO).

One stock that has continued to rise of late is social media giant Facebook. The company’s Q2 earnings report beat expectations on both earnings and revenue, with earnings of 97 cents per share (analysts predicted 81 cents) and revenue of $6.44 billion (analysts predicted $6 billion).

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