There were 48 transactions that closed in the central Pennsylvania regional market during the fourth quarter of 2018 (Q4 2018), an increase from the 35 closed transactions in the prior quarter. The 48 closed transactions also marked an increase of 2.1 percent from the 47 closed transactions during the same period in 2017.
In 2018, North America’s overall M&A value exceeded $2.0 trillion for the fourth consecutive year. M&A volume decreased 11.4 percent but aggregate transaction size increased 6.9 percent compared to 2017. Increased deal value, despite the notable drop in number of deals, was largely driven by megadeals, with four deals closing at a value above $50 billion in 2018. Median deal size in North America rose to a record $60 million in 2018, a dramatic increase from $49 million in 2017.
Part of the reason for increased deal sizes was the growth in private equity as a proportion of overall M&A. Since 2015, private equity has jumped from accounting for 25.4 percent of M&A deals to 34.2 percent in 2018. By the end of 2018, the median LBO size rose to $140 million, nearly triple the median M&A deal size. With private market participants posting record-setting fundraising figures, corporations showing an increased willingness to spend on M&A and access to credit remaining relatively cheap, competition in the M&A market looks to remain strong.
A competitive bidding market has led to many deals in recent years closing at double-digit EV/EBITDA multiples, which had risen near all-time highs in 2017 due to ample private equity dry powder reserves and readily available debt financing. The median valuation/EBITDA multiple for North American M&A transactions fell slightly to 9.7x in 2018, after an impressive figure of 10.1x in 2017.
Source: S&P Capital IQ, PitchBook and Baker Tilly Capital research (December 2018)
For more information on this topic, or to learn how Baker Tilly Capital specialists can help, contact our team.