Download our Third Quarter Mergers & Acquisitions Update
US mergers and acquisitions (M&A) activity bounced back in the third quarter after a steep decline in the second quarter. During the quarter, an estimated 2,450 deals were completed, accounting for an estimated $344 billion. While still below pre-pandemic levels, these represented increases of 25% and 12%, respectively from the second quarter. However, on a regional basis, activity in the Midwest region reached the lowest quarterly levels in at least seven years.
The economy roared back in the third quarter, thanks to an “open” economy and record Government stimulus. Advanced estimates of the quarter’s GDP reached 33.1%, approximately twice the previous record. However, the output of the US economy still trails pre-pandemic levels, and there remains considerable uncertainty: Congress failed to pass additional stimulus in the third quarter and may not do so in 2020, and COVID-19 cases are reaching new highs that could cause more “closing” of the economy.
Though deal volume was relatively unchanged in October, overall consideration spent on acquisitions ballooned during the month, climbing approximately 194% from September to $115 billion in October. Four deals amounted to over $10 billion: the acquisitions of TD Ameritrade ($22 billion), Immunomedics ($21 billion), E*Trade ($13 billion), and Noble Energy ($13 billion).
Sluggish merger and acquisition (M&A) activity carried over into September, as just over 500 transactions were completed in the US during the month.
Despite an apparent leveling off of deals (more September deals will certainly be reported as there is a lag in reporting), preliminary data from PitchBook suggests that overall transaction value climbed roughly 60% month over month.
In the Midwest, 14 transactions were preliminarily reported, a slight increase from August’s 11 deals. Deals in the information technology space were favored, accounting for six of the 14 completed.
Preliminary data from PitchBook suggests that August was a slow month for national and Midwest merger and acquisition (M&A) activity. In the US, fewer than 500 deals were completed during the month, a nearly 25% reversal of the recovery we began to see after May’s lows. Similarly, M&A activity in the Midwest fell to the lowest level of the year. However, the data may not be as dreary as a first glance shows – more than 150 deals were announced in the US during the month, estimated to account for over $110 billion in transaction value. Furthermore, the Midwest had one deal announced during the month that topped $1 billion – Waystar Health announced during the month that it would acquire Overland Park-based eSolutions for an estimated $1.35 billion.
Download the Second Quarter 2020 Private Equity Update here.
As the impact of the COVID-19 pandemic dragged into the second quarter, there was a noticeable effect on private equity deal-making. The volume of buyouts and exits (instances in which a private equity investor exits their investment) fell sharply with a 44% decline quarter over quarter, and fundraising was also off from 2019 highs.
In the second quarter, US venture capital investment was surprisingly consistent from previous quarters and actually topped the average over the last twelve quarters. This quarter we continued seeing the trend of fewer but larger deals, with volume in the second quarter falling 23% from the first to approximately 2,200 deals. However, overall value consideration during the quarter was $34.3 billion, a decline of only 4.5% from the first quarter but just a 1.3% from the quarter a year ago. This fewer-but-larger deal trend has progressed over the last five quarters now and signals that investors are more cautious with their funds but are simultaneous more willing to deploy capital into what they perceive to be high-quality companies with strong growth prospects.
M&A activity continued to pick up in July, according to preliminary data from Pitchbook. In the US, there was more than $50 billion in M&A spending, the second month of increases from May’s low. While deal counts are currently showing a sequential decline from June, we suspect there will be an increase as deals are reported (there tends to be a lag in deal reporting). We continue to monitor M&A volume, which is supported by the reopening of economies across the nation but is under pressure from rising COVID-19 cases.
Download our Second Quarter 2020 Mergers & Acquisitions Update
As economic shutdowns persisted into the second quarter, it is unsurprising that mergers and acquisitions (M&A) activity further stalled in the quarter. Deal volume in the US declined approximately 42% while spending on M&A deals fell 25% from the first quarter. The quarter demonstrated that there was extraordinary uncertainty in the market. Midwest M&A activity trended similarly to US activity, with the number of deals completed falling slightly more than 50% from the first quarter.
Download our Second Quarter 2020 Economic & Public Market Update
The second quarter was a challenging quarter on the economic front. The nationwide, COVID-related shutdown from the first quarter segued into the second quarter, and the Government issued an unprecedented fiscal stimulus package in order to keep the economy afloat. American job losses continued to reach numbers never seen prior to 2020, and the flow of money slowed (while personal savings increased to a record). As the quarter proceeded, state and local economies began to reopen, and consumers and businesses alike began to show some signs of life: jobs in hard-hit segments, such as hospitality, showed significant growth; manufacturer surveys optimistically showed expectations of growth; and both existing home sales and housing starts trended positively.