Where We Stand:
Middle Market M&A
2016
2
U.S. Consumer Sentiment2005 – Present
96.9
90.4
56.4
70.3
55.3
77.5
55.8
79.3
85.1
73.2
98.1
93.8
50
60
70
80
90
100
110
05 06 07 08 09 10 11 12 13 14 15 16
3
5%
1%
0%
3%
0%
3% 3%
1%
(3%)
2%
(2%)
(8%)
(5%)
(1%)
1%
4%
2%
4%
3% 3%
(2%)
3%
1%
5%
3%
2%
1% 0%
2%
1%
3%
4%
(1%)
5% 4%
2%
1%
4%
2%
1%
1% 1%
3%
(10%)
(8%)
(6%)
(4%)
(2%)
-%
2%
4%
6%
06 07 08 09 10 11 12 13 14 15 16
U.S
. G
DP
Gro
wth
%
U.S. GDP Growth %2006 – Present
4
Relative Equity Market Performance2006 – Present
214.7
155.6
107.3
84.8
40
60
80
100
120
140
160
180
200
220
240
260
Dec-06 Dec-08 Dec-10 Dec-12 Dec-14 Dec-16
Rela
tive
Pri
ce
Pe
rfo
rma
nc
e (
%)
S&P 500 Russell 2000 Barclays U.S. Bond Index Brent Crude Oil
Russell 2000 Index yielded the highest return by far over
the past 10 years: $215 vs. $156 on the S&P 500
5
90
95
100
105
110
115
120
11/1/16 11/4/16 11/7/16 11/10/16 11/13/16 11/16/16 11/19/16 11/22/16 11/25/16 11/28/16 12/1/16 12/4/16
Rela
tive
Pri
ce
Pe
rfo
rma
nc
e (
%)
S&P 500 Russell 2000 Barclays U.S. Bond Index Brent Crude Oil
Relative Equity Market PerformanceOne Week Before 2016 Presidential Election – Present
114.1
104.4
103.0
97.3
The outcome of the election has pushed the S&P 500
upward by 4%, showing optimism in the coming 4 years
6
U.S. Private Equity Exits2006 – YTD 2016
$146 $189 $99 $50 $138 $148 $216 $202 $292 $321 $305
626
760
521
328
669
753
999
919
1,160 1,132
996
0
200
400
600
800
1,000
1,200
$0
$50
$100
$150
$200
$250
$300
$350
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
$ in
Bil
lio
ns
Capital Exited # of Exits
*Annualized data as of
YTD September 2016
*
2015 & 2016 provided the largest amount of capital exited
over the past 10 years
7
Middle-Market Activity2006 - Present
Source: Pitchbook
*Data as of YTD September 2016
(1)LMM represents transactions
between $25 and $100 million
(2)CMM represents transactions
between $100 and $500 million
(3)UMM represents transactions
between $500 million and $1
billion
631
806
692
414
501
565
783
660
723
765
544
672
825
493
244
564
696
807 806
1,077
1,002
583
158
245
7953
207185
235 224
306
376
202
0
200
400
600
800
1,000
1,200
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
To
tal T
ran
sa
cti
on
Vo
lum
e
LMM # of deals closed CMM # of deals closed UMM # of deals closed
TOTAL TRANSACTION VOLUME BY YEAR:
(1) (3)(2)
8
$32 $38 $38 $18 $23 $27 $34 $29 $30 $30 $28
$141 $167 $107
$45 $100 $136$154 $150 $209 $171 $121
$105
$147
$50
$30
$113
$106
$122$126
$188
$194
$116
$278
$352
$194
$92
$236
$269
$310 $304
$428
$396
$265
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Dea
l va
lue
($B
)
LMM Deal value ($B) CMM Deal value ($B) UMM Deal value ($B)
PE MM DEAL VALUE: UMM DEALS REPRESENTED 41.5% OF TOTAL MM DEAL VALUE BETWEEN 2006 - YTD2016*
(1) (3)(2)
Middle-Market Activity2006 - Present
Source: Pitchbook
*Data as of YTD September 2016
(1)LMM represents transactions
between $25 and $100 million
(2)CMM represents transactions
between $100 and $500 million
(3)UMM represents transactions
between $500 million and $1
billion
9
AVERAGE TRANSACTION SIZE PER GROUP:
$51 $47 $55 $43 $45 $47 $43 $43 $42 $40 $51
$209 $202$216
$184 $177$195 $191 $185 $194
$171
$208
$664
$600
$628
$559$549
$574
$522$563
$614
$516
$575
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Av
era
ge T
ran
sacti
on
Siz
e (
$M
)
LMM Avg. Value CMM Avg. Value UMM Avg. Value(1) (3)(2)
Middle-Market Activity
(cont.)2006 - Present
Source: Pitchbook
*Data as of YTD September 2016
(1)LMM represents transactions
between $25 and $100 million
(2)CMM represents transactions
between $100 and $500 million
(3)UMM represents transactions
between $500 million and $1
billion
Despite the decline in volume of M&A activity, average transaction
sizes of CMM and UMM companies have bounced back to pre-
2008 levels
10
Source: Signal Hill, CapitalIQ
and company filings
(1)Backed by General Atlantic
(2)Backed by Stratim Capital
Private-equity buyer
2.6x 1.8x
3.5x
2.0x
0.5x
8.8x
6.1x
2.2x
0.3x
3.7x
Oct-16 Oct-16 May-16 Feb-16 Aug-16 Jun-16 Nov-16 Feb-16 Jun-15 May-15
NA
15.0x
39.9x
NA
51.5x
27.9x
10.0x 13.3x 12.3x
16.6x
Oct-16 Oct-16 May-16 Feb-16 Aug-16 Jun-16 Nov-16 Feb-16 Jun-15 May-15
Acquirer
Target
TEV ($M)
TEV / LTM REVENUE
TEV / LTM EBITDA
(1) (2)
$500.0 $487.3 $487.0 $428.2 $377.5 $362.2 $359.1 $350.2 $309.4 $227.7
EV/EBITDA EV/Revenue
Mean 23.3x 3.2x
Upper Quartile 30.9x 3.7x
Representative Technology Transactions – YTD 2016Transaction Value <$500M
11
6.6x
4.4x
3.3x
5.0x
6.0x 6.3x
5.0x 5.0x
14.5x
5.2x
Feb-16 Jul-16 Mar-16 Sep-15 Oct-15 Feb-16 Jan-16 Apr-15 Feb-16 Jan-16
Representative Software / Security TransactionsTransaction Value <$1B
TEV / LTM REVENUE
$624.0 $544.0 $540.0 $500.0 $452.5 $360.0 $200.0 $150.0 $145.0 $130.0
EV/Revenue
Mean 6.1x
Upper Quartile 6.2x
Acquirer
Target
TEV ($M)
Source: Signal Hill, CapitalIQ
and company filings
Private-equity buyer
Mr. Wieler founded Signal Hill in 2002 and has more than 30 years of investment
banking experience with buyside and sell side clients. He has orchestrated
hundreds of processes extracting billions in transaction value for clients through
M&A: divestitures, corporate restructurings, fairness opinions, and private
placements.
Prior to founding Signal Hill, Mr. Wieler co-led one of the premier Media and
Communication practices on Wall Street in the 90’s – Alex.Brown, BT Alex.Brown
and Deutsche Bank Alex.Brown. Prior to joining Alex.Brown and its predecessor
companies, Mr. Wieler was Managing Director of BT Securities Corporation.
He serves as President of the Board of the Gilman School and Trustee of the
Committee for Economic Development (“CED”).
About the Author:
Scott Wieler, Signal Hill Chairman and CEO
Signal Hill, named 2016 Boutique Technology Investment Bank of the Year by the
Global M&A Network, is a leading independent advisory boutique serving the
M&A and private capital raising needs of growth companies. Signal Hill’s
experienced bankers provide deep domain expertise and an unyielding
commitment to clients in our sectors: Internet & Digital Media, Internet
Infrastructure, Services and Software. With more than 600 completed
transactions and offices in Baltimore, Bangalore, Boston, Mumbai, Nashville, New
York, Reston and San Francisco, Signal Hill leverages deep strategic industry and
financial sponsor relationships to help our clients achieve Greater Outcomes®.
For more information, visit www.signalhill.com.
About Signal Hill
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