North American Middle Market M&A Update Q3 2018


Market Overview

M&A activity continues to be positively impacted by a strong macroeconomic environment

The middle market M&A landscape in Q2 2018 remained very favorable for sellers, driven by positive market sentiment and strong economic indicators. In Q2 2018, for the first time since 2006, the U.S. GDP growth rate was higher than the U.S. unemployment rate. Further highlighting the macroeconomic strength, 33 out of the last 36 quarters have seen U.S. GDP expand, including 17 consecutive quarters. The healthy economy has led to high levels of consumer confidence and strong demand for quality assets as elevated valuations propelled median deal size to new highs. While total M&A activity has modestly declined, valuation multiples remain at record-highs and premiums for high quality businesses continue to drive median deal size higher.



Growing Deal Size for Platform Buyouts

Record amount of dry powder is fueling transactions on a larger scale, especially for platform buyouts

The financial and strategic buyer landscape has changed dramatically as both the total number of financial buyers and capital available for investment has more than doubled since 2010. Given these factors, platform deal values have risen substantially as buyers are willing to pay more for assets of significant size. The supply of platform investments has not kept pace with increasing demand from buyers, placing scarcity value on quality platforms. As a result, this has driven up the price of platform investments to new multi-year highs.

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