AN OFFERING FROM BDO’S CORPORATE FINANCE PRACTICE …
AN OFFERING FROM BDO'S CORPORATE FINANCE PRACTICE
DEAL ADVISOR DIGEST
M&A Trends Report
Q4 2019 / ISSUE 4
PAVING THE WAY FOR INTEGRATION
i DEAL ADVISOR DIGEST: Q4 2019 / ISSUE 4
In This Issue
INTRODUCTION
1
MIDDLE MARKET M&A
2
Global North America Industry Overview
ECONOMIC INDICATORS
6
SPOTLIGHT ON PRIVATE EQUITY
8
Private Markets Show Healthy Appetite for Deals as Public Markets Waver
TRANSACTION TIPS
10
6 Key Strategies for Integration 3 Factors in Disputes
BDO DEAL ADVISOR LEADERS
14
DEAL ADVISOR DIGEST: Q4 2019 / ISSUE 4 1
Introduction
After an inconsistent start to the year, the market for mergers and acquisitions is poised for robust activity ahead. Private equity firms have shown an increasing appetite for deals and public companies continue to target value. Following the Federal Reserve's third rate cut of 2019, low interest rates will persist, and private markets still have ample capital available. As generally positive economic indicators prevail, the outlook for deal activity remains promising going forward.
Each deal also brings a degree of risk, so it's important to examine key strategies for integration. Businesses that engaged in deals earlier in 2019 are fully immersed in the complex work of integration, and they are looking to 2020 with an eye toward realizing value. Buyers must focus on their deal rationale and plan to capture value quickly, while also carefully shaping the new organization for long-term success.
2 DEAL ADVISOR DIGEST: Q4 2019 / ISSUE 4
Middle Market M&A
GLOBAL MIDDLE MARKET
Globally, M&A activity in the middle market for Q3 saw 1,883 deals totaling $163 billion overall, per data from Mergermarket. In addition, activity for M&A deals of all sizes remained strong as well, with deals for U.S. targets during the first nine months of 2019 valued at more than $1.4 trillion, the highest mark for any opening period since record-keeping began in 1980, according to Refinitiv. Worldwide, all announced M&A deals totaled $2.8 trillion for the fourth-largest opening since 1980, despite a slight decline from 2018.
After Q2 brought an increase in middle market deal activity, Q3 declined slightly while still beating Q1 results. There remains cause for optimism, as Q4 produced the best quarter for deals in both 2017 and 2018, as well as in six of the last seven years. With ample capital still available and mostly positive economic indicators persisting, the dip during Q3 could signal more value ahead for buyers who might have paid higher multiples in previous quarters. So, a push to make deals before end of year can be expected.
2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3
GLOBAL MID MARKET M&A
2500
Global Mid Market M&A
2000
1500
1000
500
0
Volume
Volume
Value (US$m)
Value (US$m)
250000 200000 150000 100000 50000 0
Source: Mergermarket
Vaalluuee(U(SU$Sm$) m)
VoVloluummee
DEAL ADVISOR DIGEST: Q4 2019 / ISSUE 4 3
NORTH AMERICAN MIDDLE MARKET
In North America, middle market activity totaled $50.8 billion from 484 deals during Q3. In light of a 10-year period of recordsetting economic expansion, that represented the lowest quarterly volume since 2013. However, deal value still beat Q1 2019, and average deal value hit the highest annual level of the decade. Concerns about looming economic uncertainty for 2020 could help fuel more volume, with high demand from private markets and some companies seeking to trim their growth plans, leading to favorable conditions for carve-out acquisitions. And as soaring transaction multiples begin to come back to Earth, there will likely be an increase in larger deals as well.
2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3
NORTH AMERICAN MID MARKET M&A
North America Mid Market M&A
800 700 600 500 400 300 200 100
0
VolVuolummee
Volume
Volume
Value (US$m)
Value (US$m)
80000 70000 60000 50000 40000 30000 20000 10000 0
Source: Mergermarket
VVaal ulue e(U(SU$mS)$m)
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