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Average M&A Deal Size Increases, Deal Volume Drops

Merger and acquisition transactions among private companies are down 58 percent, while deal size increased 73 percent, according to a survey released today by the Alliance of Merger & Acquisition Advisors® (AM&AA), the leading association and credentialing body for middle market M&A professionals.

The survey results for the 12-month period, ending June 30, 2009, were compared to two prior survey periods – calendar year 2007, and the first half of 2008. Findings include:

  • Total transactions completed were down 44 percent compared to 2007, and 58
    percent compared to the first half of 2008.
  • Dollar volume of transactions was down only 22 percent compared to 2007, and 12
    percent compared to the first half of 2008, due to an increase in average transaction
  • Average deal size increased to $13.5 million compared to $7.8 million in the first
    half of 2008 and $9 million in 2007.
  • Increase in transaction size indicates that the current credit environment has
    impacted smaller deals more than larger deals in the lower middle market.
  • Manufacturing continued to be the top industry in both number and dollar volume
    of deals.
  • The average transaction multiple reported across all industries was 4.69 x

“The lower middle market and small business clients that our members represent have experienced a tough deal climate in the last 12 months,” said Dr. Perry Campbell, Chair of the AM&AA Market Research Committee, and Managing Director of the Portland/Vancouver office of ACT Consultants, Inc. “It was a difficult time period for financing transactions, and many decided to wait for a better economic climate before entering or re-entering the market. We’re hopeful that the $400 billion overhang of capital that has built up in private equity groups will soon begin to assert itself in this market, and we may be seeing some early signs that this is starting to happen. Next year’s survey should tell the tale.”

More than 90 percent of the reported deals were for private transactions less than $100 million in size. The participants included M&A brokers (55.4 percent), advisors (36.1 percent) and buyers (8.4 percent). M&A brokers include business brokers, intermediaries and investment bankers who are compensated primarily on a success fee basis. Advisors are those compensated on an hourly or fee-for-service basis.

“It is extremely important for M&A advisors and dealmakers to stay on top of developments in the markets we serve,” said Mike Adhikari, president AM&AA and president and owner of Illinois Corporate Investments, Inc. and Business ValueXpress. “Our middle market dealmakers and advisors are on the front lines, working with privately held small and mid-sized businesses to help them achieve their goals. The survey data we provide helps our members to stay informed and provide timely market advice to their clients.”

About AM&AA

The AM&AA is the leading association and credentialing body for middle market M&A professionals. Our leadership and people have unrivalled multidisciplinary expertise in the financial services industry. AM&AA members represent sellers and buyers of small and middle-sized businesses ranging up to $500 million in transaction value. Their services are seller representation, buyer representation, due diligence, accounting financing, business valuation, tax planning, legal, strategic, other advisory and transaction services. The AM&AA offers members a solid platform for professional collaboration.

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