April 21, 2020 – According to a recent FactSet MergerStat update, US M&A deal activity decreased by 18.8% in March with 862 announcements compared to 1,061 in February. Total M&A deal value decreased by 47.2% in March as compared to February.
US M&A deal activity experienced a significant downturn in Q1 2020, with March seeing an 18.8% decrease in announcements and a 47.2% drop in total deal value compared to February. Solganick & Co. characterized the M&A environment as a "downward, near collapsing trend," projecting further decreases in Q2 2020 due to the COVID-19 pandemic. Despite this, strategic buyers and private equity firms retained substantial capital, though a halt in debt capital markets was expected to impact PE deals. In Q1 2020, the Median Enterprise Value (EV)/EBITDA for M&A deals was 11.6X, with a Median premium of 42.6% paid to acquire publicly listed companies.
Over the past 3 months, US M&A deal volume decreased in multiple sectors including healthcare services (133 vs. 175) and technology services (500 vs 538) versus Q1 2019. Fourteen out of 21 sectors tracked posted declines in deal flow over 245 deals.
Private equity M&A activity decreased by 16.5% with 86 deals in March compared to 103 in February. Transaction value decreased by 5% to $15.3B in March vs. $16.1B in February.
The most notable M&A transactions announced in Q1 2020 include the following:
- Veritas Capital’s acquisition of DXC Technology’s US State and Local Health and Human Services operations for $5B
- Insight Venture Partners acquisition of Veeam for $5B
- Ultimate Software’s acquisition of Kronos for $22B
- Koch’s acquisition of Infor for $13B
- Intuit’s acquisition of Credit Karma for $7.1B
- Visa’s acquisition of Plaid for $5.3B
- Salesforce’s acquisition of Vlocity for $1.3B
In Q1 2020, the Median Enterprise Value (EV)/EBITDA for Q1 2020 was 11.6X.
The Median premium paid to acquire a publicly listed company was 42.6% in Q1 2020.
Healthcare Technology notched 100 deals with a value of $20.2B in Q1 2020 vs 106 in Q1 2019 with a value of $113.5B.
Technology Services notched 500 deals in Q1 2020 with a value of $31B vs 538 in Q1 2019 with a value of $154.6B.
We view the current M&A environment in a downward, near collapsing trend. Buyers are pulling back significantly and are being extra cautious about taking on new acquisitions. We project Q2 2020 to decrease further as the COVID-19 pandemic affects the global economy. Although cautious, strategic buyers still hold cash on their balance sheets and PE firms are sitting on a pile of cash to do deals. The debt capital markets, however, has put on the brakes. This will affect PE deals in the near-term. We expect the largest technology companies to continue to make strategic add-ons as valuations come down.
Solganick & Co. is using data-driven analytics to drive deal values higher to achieve maximum value for its clients. For more information on Solganick & Co. or to inquire about an M&A transaction and the current environment, please contact an M&A professional at [email protected].
Source: Factset MergerStat