Skyline Advisors has released its latest Capital Markets Review: Midwest Edition for the third quarter of 2019. The report details activity and trends for mergers and acquisitions, private equity deals, and venture capital deals for both national and Midwest geographies. Key highlights include:
Acquisition Investment is Lifted to a Two-Year High on the Back of Five Out-sized Deals
According to preliminary data from Pitchbook, there were 752 M&A deals worth a total of $240 billion in July, remaining relatively unchanged from the $237 billion spent on corporate acquisition and leveraged buyout deals in June. Over 60% of the deal value is comprised of the buyouts of five target companies: Worldpay, L3 Technologies, Red Hat, First Data, and Array BioPharma.
M&A Activity Spikes in June on the Back of Mega Deals
In June, there were 643 deals in M&A capital markets worth a combined $270 billion, the highest level since the start of the decade in 2010. However, 45% of that value is attributable to United Technologies’ blockbuster acquisition of defense contractor Raytheon. In fact, the deal is the largest since Time Warner acquired AOL in January 2001.
M&A Activity Picks Up in May Despite Weaker Year than 2018
There were 720 M&A deals valued at a combined $194 billion in May, according to Pitchbook. For the year through the end of the May, there were 3,756 deals for $906 billion capital, roughly 1,140 fewer deals and $506 billion less value for the same period in 2018.
US private equity firms completed an estimated 4,828 deals worth a combined $713 billion in 2018, according to data provider Pitchbook. The figures were the highest deal count and second-highest value on record and represent increases of 5.5% and 7.2%, respectively, from 2017 levels. Notable deals during the year included Blackstone’s majority buyout of Thomson Reuters’ Financial & Risk Business (now called Refinitiv), BDT Capital Partners’ and JAB Holdings’ acquisition of Dr. Pepper Snapple, and Veritas Capital’s and Evergreen Coast Capital’s buyout of Athenahealth.
Private equity activity, in line with M&A spending, made a sudden upward spike in October, climbing 137% from September and 228% from October 2017 to $68.8 billion, the highest monthly level in 2017 and 2018, as shown by preliminary data supplied by Pitchbook. Like M&A activity, the jump in private equity spending appears to have been driven by 17 deals worth over $1 billion, which accounted for $58.6 billion, 85.2% of the monthly total.
In August, private equity deal making fell from the 2018 highs set in July, according to Pitchbook data. For the month, private equity investment for U.S. companies totaled $43.1 billion among 379 deals. This is down 39.6% from $71.26 billion invested in July but up 46.8% from $29.35 billion invested in August 2017. For the year through August, PE investment has totaled $317.69 billion among 3,382 deals, an increase of $70.23 billion over the same period of 2017.
According to data provider Pitchbook, 654 US middle-market private equity (PE) transactions closed in the second quarter, with a total value of $87.6 billion. This represents decreases of 7.0% and 3.6%, respectively, from the first quarter.
Leveraged buyout, or LBO, activity has been booming in 2018. According to an article from the Wall Street Journal last week, 2018 is on pace to have the highest dollar volume of LBOs since 2007, before the Great Recession. LBO activity for the year is up 44% from the same time-period last year. Overall M&A activity in 2018, at $2.1 trillion, is on pace to break the current record high for global M&A activity, set in 2007 at $4.3 trillion. Firms are pointing to large corporate deals - such as AT&T and Time Warner, the pending battle between Disney and Comcast for Twenty-First Century Fox, and Bayer’s takeover of Monsanto - as being a driving force behind the increase in activity. Activist investors or regulators may force the sale of assets to allow a corporate deal to take place, leaving more “orphaned” businesses for private equity firms to pursue. Also, debt is still relatively cheap, and the economy is strong, creating a greater incentive to acquire companies and select assets.
Middle-market private equity firms completed 619 transactions in the first quarter of 2018, representing $53.6 billion in deal value, according to Pitchbook. Compared to the first quarter of the 2017, completed transactions increased 17%, while deal value declined 40%, signaling a shift toward smaller transactions.