There were some interesting takeaways from last week’s PWC report on US M&A activity for the six months to June. I’ve summarized the key numbers, the operational actions and the strategic issues worth considering:

Key Numbers
  • 4587 transactions totaling $528 billion giving an average deal value of $115m
  • Middle market transactions (mid-market companies are usually defined as those with revenues generally between US$10 million and $1 billion per year) accounted for 28% of deal value.
  • Divestitures (companies that are non-core and the parent company doesn’t like anymore) accounted for 31% of deal value.
  • Private equity deals accounted for 20% of deal value.
Operational Actions
  • Companies that develop robust divestiture preparation processes are better positioned to successfully exit their business in a shorter time frame, avoid sale erosion, minimize distractions and nail their target price. We published a really good post on this subject – Acing The Due Diligence Test.
  • Private equity players are looking to improve the performance and efficiencies of their portfolio companies’ operations and gain greater industry knowledge to enhance longer term prospects. (a core TPP service)
Strategic Issues
  • Deal activity over the last several years has allowed large groups to build new positions in the Technology sector. Continued consolidation in the software space is expected partly due to the pressures brought on by the acceleration of cloud computing.
  • Health industries have seen significant increase in activity on the back of the Affordable Care Act. Pharma almost by necessity continue to look for technology grabs to supplement their R&D efforts.
  • Financial services companies seeing increased regulation and flatter organic growth are continuing to look to M&A as a growth tool. However it would appear seller aspirations on price are not matching buyer’s perception of value partly because of disagreement over future prospects.
At TPP we continue to support clients in their acquisition strategies and it must be noted that quality assets are available in this marketplace at sensible prices. Many small companies under $5m revenue are not attractive because of their size to the larger acquirers but they can allow an ambitious medium sized business to quantum leap their growth strategy.