M&A Scorecard: North America Deal-Making on Track for Solid 2019 Despite Q3 Drop
This article is an excerpt from The Northern Edge Deal Update for December 2019. Get the full pdf here.
More than 50 companies on average changed hands every day in the third quarter of 2019 in North America, according to the latest Global M&A Review Q3 2019 from Bureau van Dijk. Following a frenzied first half of the year, North America M&A activity slowed in Q3 2019, prompted by ongoing geopolitical and economic concerns: 5,156 deals totaling$243.3 billion were reported, a 54% drop in volume and a 65% plunge in value compared to Q2 2019.
Despite this subdued Q3 performance, North American year-to-date activity remains on track for another strong year, with a total of 27,877 deals worth a combined value of $1.5 trillion reported in the first nine months of 2019 (for comparison, full year 2018 brought in 31,597 transactions totaling slightly over $2 trillion).
Notable announced transactions included CBS’s $11.6 billion acquisition of Viacom, Broadcom’s $10.7 billion bid for the enterprise security business of Symantec, and Q3’s biggest private-equity backed transaction announced globally, the $8.4 billion acquisition of railroad holding company Genesee & Wyoming by Brookfield Infrastructure Partners and GIC. In Canada, highlights included Blackstone’s takeover of Dream Global Real Estate Investment Trust for $4.6 billion, Hasbro’s $4.3 billion purchase of Entertainment One and Canada Pension Plan Investment Board’s 10-percent stake increase (to 50 percent total) in 407 International for $2.4 billion.
PE and VC-backed deal-making continued at a relatively robust pace, with 3,947 transactions reported in Q3 2019, only 100 fewer compared to the previous quarter and a 4% increase over Q3 2018. Totaling $82.9 billion, the overall value of the third quarter’s transactions declined 40% from the record level of the previous three months but was in line with Q1 2019 and the last two quarters of 2018.
Similarly, “multiples and deal sizes remain elevated,” as reported by Pitchbook. Median valuation multiples for all transactions (including both public and private companies) climbed to 10.4x through Q3, “spanning industries beyond just technology and healthcare (which tend to trade at the highest valuations).” The median deal size has more than doubled in the last three years, reaching $93.5 million as of September 30, 2019.
So far in 2019, the top sector performers, Pitchbook notes, have been B2B (2,468 deals worth a combined value of $318.6 billion), IT (1,386 transactions totaling $298.1 billion), and B2C (1,116 deals totaling $219 billion).
Against this backdrop, what can we expect in 2020?