Please be aware: More recent data has been published since the time of this post. To see current market trends, check out the most recent issues of Market Updates.

In 2014, the volume and value of mergers and acquisitions of North American midmarket companies ($5 million to $500 million in value) advanced to their highest level in the last six years. There was a 17% increase in North American volume to 12,492 transactions in 2014, worth a combined $436 billion for the full year. Continuing a trend, deal value increased more than deal volume. Private equity and venture capitol were similarly strong in 2014, also hitting a six-year high.

GF Data reported that its 194 private equity contributors completed 177 transactions in 2014. The total average multiple paid by financial sponsors was 6.4X EBITDA. Interestingly, the fourth quarter saw a decrease in the average multiple to 6.1 X from 6.7X in the third quarter. The decrease was reflected in three out of four transaction size ranges.

It is unknown whether this signals an end to what most believed has been a seller's market for 2014. Smaller transactions continue to have lower multiples than larger transactions because of larger companies usually having stronger positioning, fewer uncertainties, and a more competitive market in a sole situation.

Positive Credit Environment Continues

Despite a decrease in transaction multiples overall, debt continues to be amply available for transactions and ticked up slightly in its proportion of total transaction value. Senior debt remains inexpensive by historical terms. According to GF Data's Leverage Report, the fourth quarter of 2014 saw senior debt pricing average 4.8%, with an average spread over 90-day LIBOR of 4.5%. Subordinated debt markets reflect continued health. In the fourth quarter, senior debt contributed an average of 42% of transaction value, subordinated debt averaged 16%, and the equity contribution dropped to 42%.

Wipfli Corporate Finance Advisors has been active, and we continue to see strong demand for companies with healthy margins, growth potential, and a convincing value proposition. Reflecting the generally better business and M&A environments, many business owners have decided to work with on advisor well ahead of on actual sale to proactively best position themselves to increase the probability of maximizing the value they would receive in a transaction, as well as opening the door to more transaction options.

With an anticipated wave of ownership change as a result of an aging baby boomer population, buyers will hove more options available to them, forcing sellers to distinguish their company from other opportunities in the market. Working at an early stage with an experienced M&A advisor can maximize the value of the business through preparing thoughtfully; obtaining confidential, pre-marketing feedback; and preemptively addressing issues that might reduce buyer demand.

The content of this material should not be construed as a recommendation, offer to sell or solicitation of an offer to buy a particular security or investment strategy. The content of this material was obtained from sources believed to be reliable, but neither Wipfli Corporate Finance Advisors, LLC nor RKCA, Inc., warrants the accuracy or completeness of any information contained herein and provides no assurance that this information is, in fact, accurate. The information and data contained herein is for informational purposes only and is subject to change without notice. This material should not be considered, construed or followed as investment, tax, accounting or legal ad vice. Any opinions expressed in this material are those of the authors and do not necessarily reflect those of other employees of Wipfli Corporate Finance Advisors, LLC or RKCA, Inc. Investing in the financial markets involves the risk of loss. Past performance is not indicative of future results.