Executive Summary:

  • Following a record first quarter, in which over 3,500 M&A transactions were consummated in the U.S. and Canada, preliminary data suggest transaction volume dipped slightly in the second quarter. However, Q2 was a record quarter when compared to the same time period historically.
  • Though political initiatives to bolster economic growth domestically have seemingly remained at a standstill since the election, M&A market dynamics remain healthy and intact. 
  • The M&A outlook continues to be positive, with all signs pointing to a strong second half of the year.

2Q 2017 M&A Market Review

The M&A market environment remained healthy throughout the second quarter of 2017.  Following a backlog of transactions closing in the first quarter, second quarter volume dipped slightly. The strong economic backdrop, available debt financing, and deployable capital from both private equity firms and strategic buyers continue to fuel the M&A market environment. First half data suggest transaction volume in the U.S. and Canada can reach a new record in 2017, potentially eclipsing 2007 volume of nearly 13,000 transactions.

  • S&P 500 aggregate cash positions (excluding financial companies) have hovered near $1.5 trillion over the past few years, which has led to increased scrutiny around balance sheet management and utilization. The pressure to supplement organic growth via acquisitions continues to be top of mind for boards and shareholders.

  • U.S. private equity firms have approximately $550 billion of deployable capital to invest, holding most in 2013 - 2016 vintage funds. Firms have demonstrated an eagerness to put capital to work, particularly in companies with a proven track record through economic cycles.

  • Private equity-backed deal multiples for middle market companies also reflect the competition to deploy capital within the asset class, and the overall strength of the M&A market.

  • In LBO transactions, the trend of a relatively increased level of equity contribution as a percentage of total capital structure continues, as private equity firms are willing to “stretch” and potentially over-equitize to ensure they close transactions.