Philadelphia regional M&A update: Q3 2018

M&A activity

There were 133 transactions that closed in the Philadelphia regional market during the third quarter of 2018 (Q3 2018), an increase of approximately 9.0 percent from the 122 closed transactions in the prior quarter. The 133 closed transactions mark a decrease from the 154 closed transactions during the same period in 2017. Additionally, aggregate reported transaction value decreased approximately 88.0 percent from the third quarter of 2017 (Q3 2017).

The pace of M&A activity has slowed slightly in North America in Q3 2018 compared to the same period in 2017. As of Q3 2018, M&A volume decreased 9.0 percent while total transaction size has decreased 8.2 percent compared to Q3 2017.

The slow down comes despite positive business sentiment, ease of access to financing and an uptick in successfully completed “megadeals.” Forty-five deals above $5 billion have closed as of Q3 2018 and the recent M&A boom has shown no signs of slowing after gaining significant momentum. With private market participants posting record-setting fundraising figures, corporations showed an increased willingness to spend on M&A, and with access to credit remaining relatively cheap, competition in the M&A market looks to remain strong.

A competitive bidding market has led to many deals in recent years closing at double-digit EV/EBITDA multiples, which had risen near all-time highs in 2017 due to ample private equity dry powder reserves and readily available debt financing. The median EV/EBITDA multiple for North American M&A transactions fell to 9.2x in Q3 2018, after an impressive figure of 10.2x in Q3 2017.

Source: S&P Capital IQ, PitchBook and Baker Tilly Capital research (September 2018)

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