This article is an excerpt from The BCMS Deal Update f or August 2019. Get the full pdf here.
Propelled by increased economic confidence due to the recent strong stock market performance, coupled with low financing costs, M&A deal making in North America remained healthy during the first half of 2019, reaching its highest value and one of its highest volumes since H2 2015. According to Bureau Van Dijk’s Global M&A Review H1 2019, 16,742 transactions totaling $1.1 trillion (up 22% from H2 2018 and 3% year-over-year) were completed. From a global perspective, North American activity represented 33% of H1’s global deal count and 44% of its value.
North American private equity and venture capital activity was up as well from the previous six-month period on both counts: 7,784 deals (up 4%) were announced, totaling $222 billion (a 38% increase compared to H2 2018).
Among the mega-deals which contributed to the upsurge in value were United Technologies’ $121 billion purchase of defense contractor Raytheon, Bristol-Myers Squibb’s acquisition of biopharmaceuticals maker Celgene for $74 billion, Occidental Petroleum’s $57 billion winning bid for Anadarko, Fidelity National Information Services’ $43 billion acquisition of payment processing company and technology provider Worldpay, and BB&T’s takeover of SunTrust Banks, an Atlanta-based lender, for $28 billion.
In a breakdown by industry, ‘Chemicals, rubber and plastics’ led by value, with a total of almost $119 billion, while the ‘Machinery and equipment’ sector led by volume, with a total of 1,682 deals. Healthcare was also active with a few massive oncology deals, such as Lilly’s $8 billion bid for Loxo Oncology and GlaxoSmithKline’s $5.1 billion purchase of Tesaro. Finally, technology was another strong sector; notable transactions included Salesforce’s purchase of Tableau for $15.7 billion, Alphabet’s $2.6 billion acquisition of Looker, and Apollo Global Management’s $2.7 billion buyout of Shutterfly.
As reported by Pitchbook’s 2Q 2019 M&A Report, median M&A deal size for the first six months rose to $93.5 million, and multiples remained elevated, reaching 10.2x in H1 2019, up from 9.4x in 2018 and one of the highest values in over a decade.
Against this backdrop and the early August stock market plunge, the important questions we get from middle market business owners are: “What should we expect for the rest of 2019? Have I missed my window of opportunity?”