Recently Pitchbook, a leading research company that delivers data, research and technology covering the private capital markets, including venture capital, private equity and M&A transactions, released their M&A update for 2019.
After a banner 2018, North American M&A activity has remained fervent through 1H 2019. Stellar first-half performances by major public indices fueled animal spirits while a recovery in lending markets has kept M&A financing costs at bay. PE continues to drive the prolonged M&A spell. Thanks to historical outperformance in private markets and successful fundraising efforts, PE firms now sit on a war chest of capital approaching $1 trillion.
Historic and YTD M&A activity can be seen in the chart below:
As you can see, since a good majority of M&A transactions close in the latter half of each year, and a solid portion of those in the 4th quarter, 2019 has a chance of equaling the record year we witnessed in 2018.
As an aside, the shocking thing about this chart is that through June of this year, we actually have already surpassed the entire deal value generated in 2009 during the Great Recession!
According to Pitchbook, in addition to the PE firms with a war chest of $1 trillion:
Many corporate executives are worried about a coming economic downturn and are positioning their companies to weather the storm, turning to M&A to shore up proﬁt margins and compete more effectively.
We are seeing the same trends in our own deals across 2019 as well. In fact, through the beginning of September, the total value of the deals we have supported is 30% ahead of what we achieved last year, and that was a record year for our firm. So we agree with Pitchbook and expect 2019 to finish very strong indeed.
Key Fact: Buyers Love Smaller Companies!
Another interesting fact that we have seen in further research is that the vast majority of deals closed are not mega-deals:
Nearly 70% of all transactions last year, and over 60% so far this year were valued below $100 million. And if you break the data down, a substantial portion of these deals under $100 million actually are worth under $25 million.
All of this continues to be great news if you are the owner of a privately held company in North America today. Quite simply, we continue to operate in one of the strongest seller’s markets in ages and do not anticipate that changing any time soon. However, since it takes 9-18 months to close most transactions, getting started on the process sooner is better than waiting until circumstances force you to exit.
If you would like to learn more about the current seller’s market and how you can take advantage of it, you should set aside some time to attend one of our exit planning conferences that we hold regularly throughout North America. Our complimentary, highly educational meetings may prove to be the most important you will ever attend in your professional life. To find a conference near you, use this link:
Don’t just take our word for it – here is what several of our attendees have said about the benefits of attending:
Most importantly though, as you look at current M&A market trends, be sure to also take stock of your personal journey and where you want to be in 5 years or so. Attending a conference does not obligate you to become a client. In fact, most who attend do not. However, the knowledge you stand to gain on this vital topic is priceless.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
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