The second Canadian issue of the executive brief published monthly to provide M&A market insight for C-level management and their professional advisors.
Now that Q4 2011 data is in, it’s hard not to be optimistic about the role of private equity investors in M&A deal prospects for the coming year. If you are a middle market business owner considering selling in 2012...the good news is you’re sitting square in the sweet spot of the private equity market. Although some large deals were transacted in 2011, the bulk of the deals were in the $10 to $250 million size range.
In North America, the number of transactions rose more than 20% in 2011 compared to 2010, which itself was almost double the 2009 levels. Business products and services sectors dominated North American deal flow with 32% of all reported activity, followed by consumer products and services, then IT services.
Canadian transactions accounted for close to 10% of the global M&A market in 2011. Of interesting note, as a first - the value of Canadian acquisitions of US businesses was greater than US acquisitions of Canadian businesses. In the USA in 2011, the Mid-west again dominated the geographic breakdown of private equity closings with 21% of all deal activity, with the South and Southeast coming in a close second at 16% each.
Valuation multiples continued their upward trend in 2011. With increased competition from strategic buyers and other buyout firms, private equity investors were forced to increase offering prices in order to secure best in class companies. In addition, the average leverage on transactions dropped to the lowest levels in over 10 years at an average of 46%, resulting in greater investor equity contributions.
We are bullish on the balance of 2012 and all of 2013. We recognize that there is still great economic and political uncertainty on the world stage and the upcoming US election campaigns will do little to give the business community relief and a clear sense of direction. However, when the vast amount of cash held by both corporations and private equity is combined with the moving parts beginning to fall into place (such as Greek debt restructuring), we believe that North America is well positioned for a period of robust M&A activity.
For additional information contact:
Douglas Nix, CA | Vice Chairman
Corporate Finance Associates | Toronto West | 905-845-4340 x211 | firstname.lastname@example.org