Philadelphia regional M&A update - Fourth quarter, 2015

Economic and market data

Unemployment in the Philadelphia region was estimated at 4.6 percent for December 2015, below the national rate of 5.0 percent. The Philadelphia Region unemployment rate had decreased 0.7 percent from 5.3 percent in the fourth quarter of 2014.1

Q4-2015 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 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 was a different story.

M&A activity

There were 187 reported M&A transactions during Q4-2015. Activity decreased from 197 transactions during Q3-2015. Q4-2015 also marked a decrease from 201 deals for the same period in 2014.

The aggregate deal value of the M&A transactions with reported values was $78.9 billion during Q4-2015. This is an increase from the total deal value of $27.3 billion in Q3-2015 and an increase from $25.5 billion in Q4-2014.

Philadelphia regional market M&A activity: Aggregate transaction size and number of deals

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

The Consumer sector led the Philadelphia Regional M&A activity with 21.5 percent percent of the total deals that closed in Q4-2015. Healthcare was a close second with 20.9 percent. The Information Technology, Industrials, Financial, Material, Energy, Utilities and Telecom sectors accounted for the remainder of the transactions representing 16.9 percent, 16.4 percent, 8.5 percent, 7.9 percent, 5.1 percent, 1.7 percent and 1.1 percent, respectively.

The aggregate deal value of the middle-market transactions with reported values was $1.5 billion during Q4-2015. This is a decrease from the total deal value of $2.1 billion during Q3-2015 and a decrease from $2.8 billion during Q4-2014.

Philadelphia regional middle-market M&A activity

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 of $39.8 million for the thirty-eight deals with reported values in Q4-2015 was a $48.7 million decrease from the average transaction size of the twenty-four deals with reported values in Q3-2015.

Philadelphia regional middle-market average transaction size

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 and sellers were located in the Philadelphia area during the fourth quarter of 2015.

Buyer by location

First three numbers of zip codes included in each region, as categorized by S&P Capital IQ: Harrisburg – 170, 171, 172, 178; Lancaster – 173,174,175,176; Lehigh Valley – 180,181,183; Philadelphia – 190, 191, 192; Reading – 179, 195, 196; SE Pennsylvania – 189,193,194; South Jersey – 078, 079, 080, 081, 082, 083 084; Trenton – 085, 086, 087.

Target by location

First three numbers of zip codes included in each region, as categorized by S&P Capital IQ: Harrisburg – 170, 171, 172, 178; Lancaster – 173,174,175,176; Lehigh Valley – 180,181,183; Philadelphia – 190, 191, 192; Reading – 179, 195, 196; SE Pennsylvania – 189,193,194; South Jersey – 078, 079, 080, 081, 082, 083 084; Trenton – 085, 086, 087.

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1BLS.gov -- Philadelphia--Camden--Wilmington, Pa.--N.J.--Del.--Md. Metropolitan Statistical area unemployment rate.

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