2014 Year-to-Date M&A Market Overview

The following information from GF Data highlights data regarding private equity-sponsored M&A transactions with enterprise values of $10 to 250 million. It is based on information from 223 private equity firms.

  • M&A activity in the second quarter of 2014 continued to be driven by a scarcity of quality middle-market businesses for sale and an abundance of debt financing available to their potential buyers.
  • Valuation multiples have remained virtually unchanged form 1Q – averaging 6.4x for the quarter.
  • The number of deals for companies in the $10 – 250 million range in 2014 compared to 1Q and 2Q of 2013 has increased 41 and 70 percent, respectively.

Debt Levels

Debt levels, especially on larger size transactions, have never been higher. From 2011 to 2013, total debt to earnings before interest, taxes, depreciation and amortization (EBITDA) sat at 3.4x every year. As of 2Q 2014, total debt averaged 3.9x, an increase from 3.6x in 1Q. 

Add-on Acquisitions vs. Platform Deals

Over the course of the year, add-on acquisitions have been more highly valued than platform deals, with add-ons trading at an average of 6.8x and platforms at 6.1x in the past two quarters. Typically, platforms are valued at .2 - .3x more than add-ons. This is especially true in the $10-25 million tier.

Prevalent Industries

Manufacturing, distribution, health care services and business services dominate deal volume, comprising about 80 percent of all activity. Distribution and health care services in particular are being valued above historical averages.

Sources: GF Data August 2014 M&A Report, GF Data August 2014 Leverage Report