M&A Quarterly - December 2019

December 31, 2019|Ann Hanna, Corey Vanderpoel

Market Summary

  • TEV/EBITDA in Q3 2019 averaged 7.4x, unchanged from the prior quarter.
  • The two industries showing the highest EBITDA multiples during Q3 2019 were technology and retail, each at 9.9x. EBITDA multiple for all manufacturing companies averaged 6.7x, which is 0.5x above historical averages.
  • On average, larger buyouts receive a premium to their EBITDA multiples. The spread on size premiums for larger deals between $50 and $250 million compared to deals between $10 and $50 million was 2.1x through Q3 2019, which is in-line with the average historic level of 2.2x.
  • Buyers continued through Q3 2019 to reward businesses with premiums for above-average financials (TTM revenue growth and EBITDA margins above 10% or one above 12% and the other 8%). Buyouts for businesses with above-average financials averaged 7.5x vs. 6.6x for all others, a premium of 14%, and a drop from the 25% average premium in 2018.
  • Platform buyouts averaged a higher EBITDA multiple than add-ons through Q3 2019, 7.2x compared to 6.8x, respectively, in-line with historical averages.
  • Debt utilization remained elevated through Q3 2019, with senior debt/EBITDA multiples across all industries at 3.3x compared to 3.0x in 2018.
  • Average equity contributions through Q3 2019 remained in-line with historical levels at 45.3% after a spike to 49.0% in 2018; for reference, equity contributions had remained remarkably consistent in the 43-45% range from 2015 – 2017.
  • Private equity buyers remain active, driven by historically low borrowing costs. The percentage of deals completed by PE firms (versus corporate buyers) has averaged nearly 40% through Q3 2019 from historical averages of 27-32%. Supported by strong fundraising efforts, PE firms are currently sitting on nearly $1 trillion of cash ready to deploy.

What’s new at Taureau Group

  • October – Sponsored annual M&A Forum at the Lambeau Field Atrium Legends Club and presented to an audience of nearly 200 attendees.
  • November – Sponsored ACG Global Leadership Conference event; Brock Childers, Associate, and Tom Venner, Analyst, led an ACG NextGen private equity panel.
  • November – Engaged by a client in the medical device industry for consideration of a potential sale.
  • November – Completed renovation of Taureau Group's new office space located at 320 E. Buffalo St., Suite 401 in Milwaukee's Third Ward; stay tuned for an open house announcement forthcoming.
  • December – Engaged by a client in the talent solutions industry for consideration of a potential sale. 
  • December  – Engaged by a client in the highly-engineered machining industry looking to grow through acquisitions.
  • December – Completed the sale of a metal fabrication and branded products company.
  • December – Completed the merger of The C.A. Lawton Co. with Temperform, LLC, a portfolio company of Oakland Standard Co.
  • December – Completed the acquisition of Sambatek's North Dakota transportation group for Moore Engineering, Inc.

The M&A market remains a sellers' market as favorable conditions are reaching more businesses in the smallest deal size tier. The average valuation in the $10-25 million TEV bracket is 6.2x for YTD 2019. While this is on the high side, more notably, deals in this size tier with above-average financials have averaged a full turn higher, 7.1x in 2019. 

Active Broad Acquisition Searches

  • Strategic acquisitions of metal fabrication companies in highly-engineered machining and having automated manufacturing focus
  • Add-on opportunities for buy-side clients in the plastics manufacturing and niche technology/automation industries
  • Add-on opportunities for buy-side client looking for engineering or architectural service firms with revenues between $2 million - $15 million.

FEATURED ARTICLES

Market Statistics

Total Enterprise Value (TEV)/EBITDA*

TEV '03-14 '15 '16 '17 '18 YTD'19 Total
10-25 5.5 5.9 5.8 6.3 5.9 6.2 5.7
25-50 6.2 6.6 6.4 6.6 6.9 6.9 6.3
50-100 6.7 7.8 7.2 8.2 8.9 7.5 7.2
100-250 7.3 9.0 8.9 9.1 8.8 9.6 8.1
Total 6.1 6.7 6.7 7.3 7.2 7.2 6.4
 
 
 
 
 
 
 
 

TEV/EBITDA—By Industry Category*

Industry '03-14 '15 '16 '17 '18 YTD'19 Total
Manufacturing 5.9 6.6 6.1 6.8 6.9 6.7 6.2
Business services 6.1 6.4 7.3 7.4 7.1 7.3 6.5
Health care services 6.8 7.7 7.6 8.1 7.8 8.2 7.2
Retail 6.4 5.5 7.0 7.6 7.0 9.9 6.7
Distribution 6.1 6.7 7.5 7.7 7.1 6.9 6.5
Media & Telecom 7.2 6.4 6.6 8.2 8.6 7.0 7.2
Technology 6.8 8.0 7.4 10.2 9.6 9.9 7.8
Other 5.8 5.6 6.9 6.5 7.1 6.4 6.1
Senior Debt/EBITDA—Splits by Period*
TEV Q417 Q118 Q218 Q318
Q418 Q119 Q219 Q319
10-25 3.8 2.8 3.9 2.5 2.1 4.1 3.2 2.5
25-50 2.9 3.2 2.7 2.5 2.5 3.2 2.5 3.3
50-100 3.8 4.0 3.2 2.6 3.5 3.6 2.9 2.9
100-250 3.5 5.2 3.2 3.7 3.4 3.4 5.1 3.3
Total 3.4 3.3 3.2 2.7 2.9 3.5 3.2 2.9
*Source: GF Data®. Information included from GF Data may not be used or re-published without permission from GF Data or Taureau Group.


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