Great Lakes regional M&A update: Q1-2016

Market overview

The Great Lakes regional M&A newsletter provides a recap of middle-market transactions where either the target or buyer is located in Illinois, Indiana, Michigan, Minnesota, Ohio, or Wisconsin. For this newsletter, “middle-market” is defined as transactions with enterprise values between $15 and $150 million.

Economic and market data

Middle-market M&A transactions in the Great Lakes region continued to fall during 2016’s first quarter (Q1-2016). As illustrated below, the number of deals has steadily fallen from 92 during 2015’s second quarter to 56 during Q1-2016. During Q1-2016, the aggregate value of deals with reported transaction values was slightly higher than the fourth quarter of 2015 (Q4-2015) but is well below the previous four quarter rolling average. This continues the downward sloping trend as each of the last four quarters. While the trend line has been downward sloping, higher EBITDA multiples are continuing.

The graph below depicts the quarterly trend of average EV/EBITDA multiples in the Great Lakes region for transactions of all sizes. During Q1-2016, the average EV/EBITDA was 10.2x, which has risen from 8.9x during 2015’s second quarter.

During Q1-2016, transactions with financial sponsor buyers decreased slightly to 12.5 percent from 15.6 percent during Q4-2015 but are above 2015’s average of 10.7 percent. Top middle-market strategic acquirers over the last twelve months were Arthur J. Gallagher & Co. and US LBM Holdings, LLC with nineteen and ten acquisitions, respectively. Audax Group was the most active middle-market financial sponsor in the region, with five acquisitions over the last twelve months.

Select Q1-2016 transactions by industry >

Of the deals with reported primary target locations during 2016’s first quarter, Illinois had the highest activity with fifteen deals, following by Minnesota with eleven deals. The highest value acquisitions by state and the highest value acquisitions with reported Enterprise Value/EBITDA multiples are displayed below.

Q1-2016 highest value acquisitions from each state >

Q1-2016 highest value acquisitions with reported implied EBITDA multiples >

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