This month’s issue of the monthly executive brief providing M&A market insight for C-level management and their professional advisors.
After a disappointing first half of the year, 2013 is finally picking up steam as the year progresses through Q3 and into Q4. According to GF Data, there were less than half as many transactions completed in the first half of 2013 as compared with the same period in 2012. As a firm, we’ve seen a similar trend, but the good news is as we turned the corner into Q3, activity began to pick up with a number of successful closings.
Data shows the quality premium is back. Better financial performers (businesses with TTM EBITDA margins and revenue growth rates both above 10% or one above 12% and the other at least 8%) were valued at a 12 percent premium to other businesses in buyout transactions. The average for the 10 years prior to this year was 3%.
Where the quality premium is back, the size premium is not. During the first 6 months of 2013, businesses in the $50–$250 million TEV range sold at an average of 6.3x compared to 6.0x for those in the $10–$50 million bracket. Historically the gap has been 1.1x. However, the numbers may not be telling the whole story, as small sample sizes can wreak havoc with averages. Deals in the $100–$250 million value range have been trading at an average of 5.6x in the first half of 2013, nearly a full turn below the 6.5x average in the $50–$100 million bracket. When deal volume slows, value investors assume a greater share of the deal market. Those investors tend to concentrate on larger transactions, so the averages tend to get pulled down accordingly.
We are optimistic that 2013 will finish strong.
For more information contact:
Douglas Nix, CA, CPA | Vice Chairman CFA
905 845 4340 ext. 211