Pittsburgh regional M&A update: Q4-2017

M&A activity

There were 53 transactions that closed in the Pittsburgh regional market during the fourth quarter of 2017 (Q4-2017), an increase of approximately 12.8 percent from the 47 closed transactions in the prior quarter. The 53 closed transactions marks a decrease from the 57 closed transactions during the same period in 2016.

The pace of M&A activity in North America slowed in 2017, following the record-setting year in 2016. In 2017, M&A activity resembled dealmaking during the period from 2011 to 2013 more than it did the recent boom from 2014 to 2016. 2017 M&A volume decreased 16.1 percent and transaction size decreased 16.0 percent compared to 2016.

The decline came despite sound economic indicators in the U.S., including sustained growth in manufacturing, strong corporate earnings growth and record-high CEO sentiment. While corporations in general are already operating from a position of strength, recent tax legislation and repatriation of foreign earnings are expected to further bolster balance sheets and give a boost to M&A in 2018. U.S. firms are expected to bring back $300-400 billion in cash, which is expected to be used on a combination of dividends, stock buybacks, capital expenditures and acquisitions.

An increase in M&A activity will likely put further upward pressure on price multiples, which have already risen to recent highs due to ample private equity investible reserves and readily available debt financing. The median valuation/EBITDA multiple for North American M&A transactions reached 10.3x in 2017, up slightly from 10.2x in 2016.

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