The U.S. economy continued to expand across a spectrum of measures in July. Headlining the news, the Department of Commerce reported in late July that U.S. GDP grew 4.1% in the second quarter. Employment numbers continued strong readings as well, with July unemployment ticking down to 3.9% from 4.0% in June, the economy adding 157,000 jobs, and wages growing 2.7% from one year prior.
In July 2018, merger and acquisition (M&A) activity fell from yearly highs set in June. Total disclosed capital invested for mergers, acquisitions, and buyouts reached $213.9 billion in July, down 37.6% from a 2018 high of $343.2 billion invested in June. M&A capital investment has totaled $1.205 trillion year-to-date, up 55.2% from $776.4 billion in the same period of 2017. Business-to-business (B2B) companies have garnered extra attention, comprising 37% of the targets so far in 2018, and information technology (IT) companies accounted for another 19%. Deal making has climbed throughout the year thanks to a strong economy and a tax cut that provided more corporate funds for mergers, acquisitions, and buyouts. Deal-making has been particularly high in the last two months, thanks in part to fewer antitrust obstacles from regulators. Looking ahead, as the tax cut cash surge wears off and the possibility of a trade ware escalates, firms may become more reluctant to spend on deals.
In July 2018, 15 U.S. companies went through an initial public offering (IPO), raising a combined $2.077 billion. Those figures are down from the $3.716 billion raised in 26 IPOs in June 2018. For the calendar year 2018 through July, $24.3 billion has been raised through 101 IPOs, up from the $21.3 billion raised in the same period of 2017.
Last week, the Bureau of Labor Statistics reported the unemployment rate fell, hourly wages grew modestly, and the economy added fewer jobs than expected. Also last week, the Federal Open Market Committee decided to leave the federal funds rate unchanged and automakers announced U.S. sales fell in July.
Last week, a variety of industries partook in M&A activity. Below we highlight five deals that were announced, the largest of which was Cisco Systems’ acquisition of Duo Security for $2.35 billion.
Last week, technology hardware firms Sonos and Arlo Technologies debuted shares on U.S. exchanges. Home security firm Arlo raised $163 million on the NYSE. Sonos, a wireless speaker producer, raised $208 million. Lastly, on Thursday, Eli Lilly’s Elanco Animal Health filed for a U.S. IPO.
Markets performed well in July, with major indices closing in strong, positive territory. The S&P 500 increased 3.6% to 2,816 in July and is up 5.3% year to date. Similarly, the Dow Jones Industrial Average (DJIA) increased nearly 5% during the month to 25,415.19, and the NASDAQ increased 2.2% to 7,671.79.
The Center for the Middle Market at Ohio State University released their quarterly Middle Market Indicator for the second quarter of 2018. Overall, the report showed decidedly strong improvements across the middle market over the last quarter and year.
The Commerce Department reported a strong GDP reading of 4.1% in the second quarter of 2018. Contrarily, Great Plains farmers are seeing tougher access to credit as farm incomes continue to slump.