Great Lakes regional M&A update: Q4-2016

M&A activity

Baker Tilly Capital, LLC’s Great Lakes region M&A update provides a recap of middle market transactions where the target is located in Illinois, Indiana, Michigan, Minnesota, Ohio or Wisconsin. The “middle market” for purposes of this newsletter is defined as transactions with enterprise values between $10 and $200 million.

Middle market M&A transactions in the Great Lakes region continued to fall during 2016’s fourth quarter (Q4-2016). The number of middle market M&A deals in the Great Lakes Region with or without reported values declined slightly (as compared to Q3-2016) during Q4-2016. In 2016, 286, 292, 354 and 360 deals were closed during Q1, Q2, Q3 and Q4 of 2016, respectively. Between 2012 and 2016, the highest number of closed deals during a quarter was 562 during Q4-2012 and the lowest was 277 during Q1-2013.

As illustrated below, the number of deals with reported values fell to 23 during Q4-2016 and an average of 33 deals per quarter during 2016. The number of deals with reported values in 2016 was lower than the previous four years. During Q4-2016, the aggregate value of deals with reported transaction values reached its lowest point since Q1-2013. This continues the downward sloping trend through each of the last five quarters. This downward trend is partially explained by the cooling off of the strong M&A market during 2014 and 2015. While the trend line for number of transactions and deal value have been downward sloping, higher EBITDA multiples are continuing.

Great Lakes regional market M&A activity:
Number and aggregate value of deals with reported value

Source: Capital IQ and Baker Tilly Capital, LLC Insights

As displayed below, the average value of deals with reported values increased to $69.2 million during Q4-2016 compared to $62.7 million during Q3-2016. Closed deals during 2016 saw the highest average transaction value over the last five years.

Average size of middle-market deals with reported values – Great Lakes region

Source: Capital IQ and Baker Tilly Capital, LLC Insights

The graph below depicts the quarterly trend of average EV/EBITDA multiples in the Great Lakes region for transactions of all sizes. During Q4-2016, the average EV/EBITDA was 10.88x, which has steadily risen from 9.95x during Q4-2015.

Average EV/EBITDA – Great Lakes M&A

Source: Capital IQ and Baker Tilly Capital, LLC Insights

During Q4-2016, transactions with financial sponsor buyers increased slightly to 8.7% compared to 7.1% during Q3-2016. During 2016, financial sponsors accounted for 10.8% of transactions with reported value, compared to 2015’s average of 11.8%.

M&A activity by buyer type Q4-2016

M&A activity by industry Q4-2016

Source: Capital IQ, excludes Baker Tilly Capital, LLC deemed outliers

Healthcare & biotech sector transactions held the highest percentage of deals closed with reported value during Q4-2016, followed closely by industrial and materials and financial sector transactions.

Of the deals with reported primary target locations during Q4-2016, Illinois had the highest activity with eight deals, followed by Indiana with five deals.. The highest value acquisitions by state and the highest value acquisitions with reported enterprise value are displayed here.

Source: Capital IQ and Baker Tilly Capital, LLC Insights

View the full Great Lakes M&A update >


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