Philadelphia regional M&A update: Q2 2020

M&A activity

There were 102 transactions that closed in the Philadelphia regional market during the second quarter of 2020 (Q2 2020), a decrease of approximately 43.0 percent from the 179 closed transactions in the prior quarter. The 102 closed transactions mark a decrease from the 146 closed transactions during the same period in 2019. Additionally, aggregate reported transaction value decreased by 82.9 percent from Q1 2020.

In Q2 2020, M&A activity experienced a sharp decline as COVID-19 continued to ravage the global economy. North America’s overall M&A transaction value was $336.8 billion, representing a 33.1% year-over-year (YoY) decline. Additionally, M&A volume by transactions closed decreased 26.7% YoY. However, these figures fail to fully capture the substantial decline in M&A markets as Q2 2019 was also a weak quarter for transaction activity. To better illustrate the detrimental impact of COVID-19, Q2 2020 saw quarter-over-quarter (QoQ) declines of 41.1% and 24.2% for overall M&A transaction value and M&A volume by transactions closed, respectively. Unfortunately, there is no indication as to when the virus will subdue and M&A markets will likely feel the effects of this uncertainty in the following months.

Although the virus contributed to reduced M&A activity, valuations have increased as of Q2 2020. The median EV / EBITDA multiple for M&A transactions increased to 10.5x in Q2 2020, up from 9.8x in 2019.

M&A Q2 2020 Philadelphia quarterly activity

Source: S&P Capital IQ, PitchBook, and Baker Tilly Capital research (August 2020)

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