Central Pennsylvania middle-market update - Fourth quarter, 2015

Economic and market data

Unemployment in the Central Pennsylvania region was estimated at 4.1 percent for the third quarter 2015, below the national rate of 5.0 percent. The Central Pennsylvania region unemployment rate had decreased 0.6 percent from 4.7 percent in the fourth quarter of 2014.1

Fourth quarter 2015 experienced positive financial results, as the S&P, DJIA, and NASDAQ closed up 6.5 percent, 7.0 percent, and 8.4 percent, respectively for the quarter. General market sentiment for the fourth quarter was driven by positive momentum in the US labor markets as unemployment claims data trended down for the period. Additionally, the U.S. Federal Reserve Bank had indicated that their data suggested that market conditions had improved to a point where they would reduce their landmark monetary easing policies. Obviously, January 2016 has been a different story.

M&A activity

Bucking the national trend, closed M&A transactions surged during Q4-2015, with 50 transactions reported, up from 29 transactions during Q3-2015 and 37 transactions during the same period in 2014.  

The aggregate deal value of the M&A transactions with reported values was $1.7 billion during Q4-2015. This is a decrease from the total deal value of $3.0 billion in Q3-2015 and a decrease from $3.5 billion in Q4-2014. These decreases are a result of few $1.0 billion or greater deals during the period.

Central Pennsylvania regional M&A activity: Aggregate transaction size and number of deals

Source: Capital IQ and Baker Tilly Capital research, Dec. 2015.

The Industrial sector led the regional M&A activity with 40.0 percent of the total deals that closed in Q4-2015. The Consumer, Financial, Information Technology, Healthcare, and Utilities sectors accounted for the remainder of the transactions representing 20.0 percent, 12.0 percent, 12.0 percent, 10.0 percent and 6.0 percent, respectively.

The aggregate deal value of the middle-market transactions with reported values was $220.7 million during Q4-2015. This is an increase from the total deal value of $172.0 million during Q3-2015 and a decrease from $508.2 million during Q4-2014.

Central Pennsylvania regional middle-market M&A activity: Aggregate transaction size and number of middle-market deals

Source: Capital IQ and Baker Tilly Capital research, Dec. 2015.
Middle-market defined as transaction values between $5 million and $250 million.

The average transaction size $27.6 million for the eight deals with reported values in Q4-2015 was a $58.4 million decrease from the average transaction size of the two deals with reported values in Q3-2015.

Central Pennsylvania regional middle-market M&A activity: Average size of deals with reported value

Source: Capital IQ and Baker Tilly Capital, Dec. 2015.
Middle-market defined as transaction values between $5 million and $250 million.

Buyers and targets by location

As presented below, the largest number of buyers were located in the Harrisburg and Lancaster areas during the fourth quarter of 2015, while the largest number of targets were located in the Harrisburg area.

Buyer by location

First three numbers of zip codes included in each region, as categorized by S&P Capital IQ: Altoona—166,168; Harrisburg – 170, 171, 172, 178; Lancaster – 173,174,175,176; Reading – 179; Lehigh Valley – 180,181,183; Williamsport –197,177.

Target by location

First three numbers of zip codes included in each region, as categorized by S&P Capital IQ: Altoona—166,168; Harrisburg – 170, 171, 172, 178; Lancaster – 173,174,175,176; Reading – 179; Lehigh Valley – 180,181,183; Williamsport –197,177.

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For more information on this deal, or to learn how Baker Tilly Capital specialists can help, contact our team.

1BLS.gov - weighted average of the Allentown, Altoona, Bloomsburg, Chambersburg, East Stroudsburg, Gettysburg, Harrisburg, Lancaster, Lebanon, Reading, Scranton, State College, Williamsport, and York unemployment rates.

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