m&a transaction services, mergers & acquisitions

Deal Closing Rates and Multiples Increase in 2nd Half of 2009

The annualized closing rates for merger and acquisition transactions among private companies increased in the second half of 2009 and reported multiples were up as well according to the Deal Stats 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 Deal Stats survey results for the 6-month period, ending December 31, 2009, were compared to prior survey periods. Findings include:

  • The total value of all reported transactions at $1.25 billion in the 6 month period was nearly as high as the total for reported transactions in the prior 12 months at $1.36 billion.
  • Both M&A Brokers and Advisors showed an increase in deal closing rates. In the second half of 2009 M&A Brokers closed transactions at an annualized rate of 3.3 per year compared to only 2.6 in the prior twelve months, while M&A Advisors improved from a rate of 4 per year to 8.1.
  • Both average and median transaction multiples were up by approximately half a turn of EBITDA in the second half of 2009 compared to the prior 12 months with the average EBITDA multiple across all industries increasing from 4.69 to 5.22 and the median increasing from 4.23 to 4.75.
  • Average deal size reported by all members was $10.7 million in the second half of 2009 compared to $13.5 million in the prior 12 months but results were mixed, with Advisors reporting an increase in average deal size from 12.6 million to $16.2 million, while M&A Brokers reported declining deal size from an average $14.3 million to $7.6 million.
  • Manufacturing continued to be the top industry in both number and dollar volume of deals, echoing results from all prior surveys.

“Deal making in the lower middle market began to recover in the second half of 2009 but the results were uneven,” said Dr. Perry Campbell, Chair of the AM&AA Market Research Committee, and Managing Director of the Portland/Vancouver office of ACT Consultants, Inc. “The recovery for our Advisors was substantial as they returned to historical deal closing rates, but the recovery was incomplete for our M&A Brokers whose deal closing rates increased while transaction sizes decreased. One of the reasons for the differential may be the fact that many of our M&A Brokers do not handle distressed companies, while many of our Advisors do.”

The majority of reported deals were for private transactions less than $50 million in size. The participants included M&A Brokers (57.6 percent), Advisors (28.2 percent) and buyers (14.1 percent). M&A Brokers include business brokers, intermediaries and investment bankers who are compensated largely on a success fee basis. Advisors are those compensated on an hourly or fee-for-service basis.

“It is very important for M&A Advisors and deal-makers to track trends in the markets we serve,” said Mike Adhikari, president of AM&AA and president and owner of Illinois Corporate Investments, Inc. and Business ValueXpress. “The upward trend we see here, coupled with the dry powder in the hands of private equity groups, and the increasing appetites of both strategic and financial buyers gives us hope that we’ll see further improvement in the deal climate in 2010.”

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.

Deal Stats Sponsors

Financial support for the Deal Stats survey was provided by:

Main Street Capital Corporation
Business ValueXpress
ACT Consultants, Inc.
Alliance of Merger & Acquisition Advisors

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