North American Middle Market M&A Update Q2 2018


Market Overview

M&A valuation multiples favor larger middle market transactions

Valuations for middle market transactions set a very strong pace to start 2018, while overall deal count in North America and Europe was down 18% year over year. Increased purchasing power, a healthy economy and scarcity of quality assets have rewarded larger transactions while total volume declines. The positive market sentiment combined with nominal organic growth opportunities is leading to high demand for acquisitions by strategic and financial buyers. The current M&A market is positioned favorably for sellers given the decline in overall deal volume and favorable valuation trends for high quality, larger assets.

S&P 500 Multiple Expansion

Strong corporate earnings and multiple expansions are driving higher purchase price multiples

The increase in corporate purchasing power due to an extended period of strong earnings has enabled strategic buyers to pay more for acquisitions. The S&P 500 EV-to-EBITDA ratio is currently at 13.0x, compared to 8.6x just five years ago. Over the same time period, EBITDA per share for the S&P 500 increased over 22%, reaching $61.0 in Q1 2018. The expanding valuations in public markets coupled with strong corporate earnings have created a buoying effect on middle market transaction multiples.

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