M&A Snapshot

Q4 2015 M&A Snapshot

Posted On: February 5th, 2016

Sector Status:

The headline is that both number of transactions and value continued to show nice gains in Q4 2015.  However, headlines rarely tell the whole story.  Taking a closer look at the market reveals some interesting nuances.

Premium value deals remain a distinct minority of activity.  Often getting a transaction completed is less important to sellers than the terms of the transaction.  When assessing valuations, as we’ve highlighted in the past, a rather small proportion of transactions represent premium value (greater than 5x revenue or invested capital).  Historically in any given quarter, between 15% to 30% of announced transactions within the $25mm – $1 billion price range (what we call core transactions) represent that coveted premium value.  This past quarter it was at the lower end of that range, at 19%.

Also of note, average consideration paid in any one transaction has shown muted growth even in a market with a very strong increase in activity.  Since 2010, total consideration paid for core transactions was up 117% while the mean transaction consideration only increased by 32%.  The message: valuations remain relatively consistent with long-term norms.

Below find our full Q4 assessment:

Q4 2015 Snapshot by ArchitectPartners