WCF Advisors Blog
Category:
Market Updates
A quarterly, insightful look at middle-market merger and acquisition activity.
The Seventh Inning Stretch (Extra Innings, Anyone?)
Sep 30, 2019
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Market Updates
With the third quarter wrapping up, the M&A markets continue to show more strength than weakness. Are we in the seventh inning stretch, and are there extra innings to look forward to?
To fully analyze the current state of affairs, we must look to secular dynamics and their impact on valuations. Even in those sectors, which are off of their all-time highs, with a longer term perspective, valuations remain strong.
Several externalities — tariffs, trade wars, interest rates and the...
Will the First Quarter Sluggishness Become a 2019 Trend?
Jul 10, 2019
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Market Updates
After another record-setting year in 2018, mergers and acquisition activity slowed during the first quarter of 2019. However, the slowdown in completed deals between the fourth quarter of 2018 and the first quarter of 2019 was in line with historical declines observed during first quarters of the past several years.
Private equity transaction volumes involving deals between $10 million and $250 million fell by 9.5% on a quarter-over-quarter basis, according to GF Data®. Multiples, however,...
Deal Activity Continues to Be Robust — When Will the Slow-Down Hit?
Mar 29, 2019
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Market Updates
Several things have driven deal flow and valuations for the last several years — namely, demographics, available capital, a favorable lending environment and generally favorable economic conditions. The low unemployment rate is also cited by the Market Pulse Fourth Quarter 2018 report as fueling high demand by buyers.
However, many sources are forecasting a slowdown in the future. The question continues to be not if, but when the slowdown will occur. Market Pulse reports 83% of the...
The Clock is Ticking
Jan 01, 2019
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Market Updates
There is continued evidence multiples have plateaued. For the third quarter of 2018, valuations averaged 7.3x EBITDA, which is a reduction from the second quarter 2018 average multiple of 7.4x and the peak multiple of 8.0x achieved in the fourth quarter of 2017.
"The M&A market is driven by corporate performance, availability of debt and general economic strength."
On a positive note, deal activity increased over Q2 and reversed a downward trend from the Q4 2017 peak. During the third...
Contrary to Market Feel, Deal Numbers Are Down, But Deal Dollars Are Up
Sep 28, 2018
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Market Updates
Valuations for the quarter averaged 7.4 times adjusted EBITDA, though well above the first quarter of 2018, but below the third and fourth quarters of 2017. Many believe this is due to facts and circumstances concerning the transactions and not the trend of the market.
The 47 completed deals in the GF Data® cohort represent a drop from 63 in the first quarter and 57 in the year-ago second quarter. Those reports seemed at odds with our impressions of the market and others in the industry.
For...
Abundant Debt and Robust Valuations Characterize First Quarter
Jun 27, 2018
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Market Updates
With a strong 2017 in the rearview mirror, mergers and acquisitions (M&A) activity in the first quarter continued last year’s themes of high valuations and strong use of debt.
According to GF Data®, middle-market deal valuations and use of debt remain robust, with an average TEV/EBITDA multiple of 6.9x and an average Debt/EBITDA multiple of 4.2x. In addition, middle-market companies are reporting the highest rate of revenue and employment growth since one year ago, and confidence...
Looking Back, Looking Forward, Looking Up!
Mar 12, 2018
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Market Updates
M&A activity finished strong in 2017, despite some deals choosing a January close for tax purposes, which potentially underinflates the 2017 volume and buoys January 2018 volume. Factset reports a total 2017 deal volume of 11,673 deals worth $1.7 trillion. January deal volume increased, totaling 910 deals versus 819 in December.
Valuations remain strong in the middle market, with GF Data® reporting an “eye-popping continued surge in valuations in the fourth quarter” from its...
Let the Good Times Roll
Jan 11, 2018
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Market Updates
To say the third quarter was strong would be an understatement. With valuations and leverage levels at nearly all-time highs, it is clearly a seller’s market in the middle and lower-middle markets. In fact, according to Pitchbook, valuations reached their highest level on record during the quarter. These observations beg the question, “What’s driving the markets, and how long will it last?”As everyone knows, financial and economic markets are cyclical. So the...
Strategic Buyers Pay up for Opportunities
Sep 21, 2017
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Market Updates
The M&A market is somewhat a tale of two markets, large and small. While the middle market ($50M to $500M in deal value) has remained relatively stable, mega deals ($500M in deal value and above) have dominated in terms of volume and value. The number and value of mega deals have increased year over year in 2017, while middle market deals have trended slightly behind and lower middle market deals have declined. Similar to what we reported last quarter, total deal volume in the United States...
M&A Market in Wait-and-See Mode
Jun 14, 2017
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Market Updates
After a few years of robust merger and acquisition activity, policy uncertainty has the market poised for a temporary breather. There are some mixed signals from the first quarter (Q1) of 2017. For starters, overall M&A activity in the United States started relatively modestly in 2017 according to Pitchbook, at least in contrast to the past few years. However, transaction multiples edged up to a multi-year high. The increase in valuations is likely a result of the...
