M&AReport
20173Q
Credits & ContactPitchBook Data, Inc.
JOHN GABBERT Founder, CEO
ADLEY BOWDEN Vice President,
Market Development & Analysis
ContentDYLAN E. COX Analyst II
BRYAN HANSON Data Analyst II
ERIC MALONEY Graphic Designer
Contact PitchBook pitchbook.com
RESEARCH
EDITORIAL
SALES
COPYRIGHT © 2017 by PitchBook Data, Inc. All rights reserved. No part of this publication may be reproduced in any form or by any means—graphic, electronic, or mechanical, including photocopying, recording, taping, and information storage and retrieval systems—without the express written permission of PitchBook Data, Inc. Contents are based on information from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Nothing herein should be construed as any past, current or future recommendation to buy or sell any security or an offer to sell, or a solicitation of an offer to buy any security. This material does not purport to contain all of the information that a prospective investor may wish to consider and is not to be relied upon as such or used in substitution for the exercise of independent judgment.
Introduction 3
Overview 4-6
Spotlight: Target Company
Characteristics7
M&A by Sector & Size 8
Spotlight: Energy, Materials &
Resources9
Private Equity 10
Methodology 11
Contents
The PitchBook PlatformThe data in this report comes from the PitchBook Platform–our
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to request a free trial.
2 PITCHBOOK 3Q 2017 M&A REPORT
A record for institut ional
backers—16.9% of all M& A Y TDIntroduction
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Key Takeaways
» After a record-setting 2016, M&A activity in North America and
Europe has totaled $1.4 trillion across 13,972 deals through 3Q 2017,
declines of 19% and 23% from the same period last year.
» The proportion of target companies that have institutional backing
(i.e. private equity or venture capital) at the time of acquisition has
risen to an all-time high of 16.9% of M&A. The trend reflects the
growing institutionalization of private markets, particularly in the
developed markets of North America and Europe.
» Amidst declining activity, M&A today increasingly involves larger
acquisition targets. The median transaction size has risen from $31.6
million in 2016 to $52.7 million through 3Q 2017, a 66% increase.
Rising valuations, platform roll-ups, and large cash reserves on
corporate balance sheets are all driving the increase in deal sizes.
Beginning last quarter, we revised our methodology for estimating total
deal flow. Through this and other recent methodology changes, we aim
to provide an even more accurate picture of the private markets. Please
see the methodology page for this report for more details.
We hope this report is useful in your practice. As always, feel free to send
any questions or comments to [email protected].
DYLAN E. COX
Analyst II
3 PITCHBOOK 3Q 2017 M&A REPORT
The M& A cycle subsidesOverview
A return to pre-2014 levels
M&A activity in North America & Europe
After a record-setting year in 2016,
M&A activity in North America and
Europe has totaled $1.4 trillion
across 13,972 deals through 3Q
2017, declines of 19% and 23% from
the same period last year. Through
3Q, M&A activity resembles
dealmaking during 2011 to 2013
more than it does the recent boom
from 2014 to 2016. Amid declining
volume, M&A today increasingly
involves larger acquisition targets.
The median transaction size has
risen from $31.6 million in 2016 to
$52.7 million through 3Q 2017, a
66% increase. Rising valuations,
large cash reserves on corporate
balance sheets, and platform
rollups resulting from PE add-ons
are all driving the increase in deal
sizes. No company seems too large
to be considered a target.
Cross-Atlantic deal flow continues
to be a more prominent feature
of today’s M&A landscape.
Through 3Q 2017, 6.6% of North
American deals involved European
acquirers and 9.4% of European
deals involved North American
acquirers, compared to 5.8% and
7.2%, respectively, in 2007. Two
key drivers of this trend include
the increasingly global nature of
trade and the broadening reach of
PE firms, many of which have now
established offices across the pond
from where they’re headquartered.
Source: PitchBook
*As of 9/30/2017
The median M&A transaction jumps 66% in size
Median M&A deal size ($M)
Source: PitchBook
*As of 9/30/2017
$2,1
31
$1,2
93
$720
$1,0
00
$1,1
31
$1,2
28
$1,3
23
$1,7
77
$2,2
20
$2,2
89
$1,3
64
18,13615,708
12,384
16,220
19,569 20,09119,874
23,48725,906
23,004
13,972
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Deal Value ($B) Es�mated Deal Value ($B)
Deal Count Es�mated Deal Count
$31.6
$52.7
$0
$10
$20
$30
$40
$50
$60
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
4 PITCHBOOK 3Q 2017 M&A REPORT
A slowdown despite some positive
signs
M&A activity in North America
totaled $925.3 billion across
7,348 transactions through 3Q
2017, 24.3% and 22.6% behind
the first three quarters of 2016.
The slowdown comes despite an
increase in CEO confidence—a
historical bellwether for M&A
activity—and a 14.2% increase
in the value of the S&P 500
(using total return) in the first
three quarters of 2017. Facing
the possibility of major tax and
healthcare reform this year, some
investors in the US have taken a
wait-and-see approach to M&A.
If dealmakers get more clarity
regarding potential changes to
either system, they will be more
likely to pursue deals.
While activity slowed in North
America, prices continued to rise.
The median EV/EBITDA multiple for
transactions completed through
3Q 2017 edged up to 10.6x—the
highest we’ve ever tracked. Easy
credit continues to fuel price
increases, with the median debt
usage jumping to 5.9x EBITDA
through 3Q 2017, comfortably
higher than any other year in our
dataset. Higher debt multiples
reflect the currently voracious
appetite for leveraged loans, with
new issuance volume on track to
surpass pre-financial crisis levels,
according to S&P LCD. Though
equity contributions have inched
downward to 4.8x EBITDA this year,
they also remain elevated on a
historical basis due to the elevated
pricing environment.
Dealmakers adopt a wait-and-see approach
North American M&A activity
Multiples remain highest tracked in North America
Median North American EV/EBITDA multiples
Source: PitchBook
*As of 9/30/2017. Deal counts are not estimated, as opposed to overall deal volume.
Source: PitchBook
*As of 9/30/2017
$1,3
24
$791
$523
$679
$693
$804
$794
$1,1
51
$1,4
77
$1,5
28
$925
9,9268,587
6,750
8,538
9,77410,786
10,373
12,96013,938
12,259
7,348
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Deal Value ($B) Deal Count
5.0x
4.3x
3.1x
4.6x
4.7x
4.2x 5.
0x
5.1x 5.3x
5.1x 5.
9x
3.5x
3.4x
3.4x
3.5x 3.
9x
3.8x 3.
3x 3.8x 4.
2x 5.1x 4.
8x
8.5x7.7x
6.4x
8.1x8.6x
8.0x 8.3x8.9x
9.5x10.2x
10.6x
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Debt/EBITDA Equity/EBITDA Valua�on/EBITDA
5 PITCHBOOK 3Q 2017 M&A REPORT
Europe resembles North America in
some respects
Similar to their North American
counterparts, European investors
have slowed their pace of
dealmaking this year. European
M&A activity totaled $438.95
billion across 5,810 transactions
through 3Q 2017, 19.8% and
32.2% behind the same period
last year. Following the UK’s vote
last year to leave the EU, would-
be acquirers feared that further
political disintegration was likely
if anti-establishment parties had
won elections in the Netherlands,
France, or Germany. While some
of these fears have abated, the
political situation in Europe
remains tenuous. At the same time,
the ECB faces the daunting task
of ending QE without impeding
growth. Recently, it indicated it
would slowly taper its bond-buying
program into 2018, assuaging
any fears of a sharp rise in
interest rates in the near term and
increasing the likelihood of strong
deal flow into next year.
After tapering off slightly in the
first two quarters of the year, the
median European EV/EBITDA
multiple rebounded to 10.8x in for
transactions completed in 3Q 2017,
bringing the European YTD median
to 10.0x, the highest in our dataset.
The rise in valuations can be
partially attributed to the booming
leveraged loan market, as well as
increased competition for a limited
number of acquisition targets
resulting from the eruption in M&A
activity during 2015 and 2016.
The M&A environment remains marked by caution
European M&A activity
Pricing pressures remain unabated
Median European EV/EBITDA multiples
Source: PitchBook
*As of 9/30/2017. Note: Since the penultimate edition of the M&A Report, a significant
update to the PitchBook Platform occurred, resulting in the addition of many financial
data points to our European figures. Hence, there will be significant changes between
these figures and those in prior editions of the M&A Report.
$806
$502
$197
$320
$437
$424
$530
$625
$743
$761
$439
8,2107,121
5,634
7,682
9,795
9,305
9,501
10,52711,968
10,745
5,810
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Deal Value ($B) Deal Count
4.6x
3.8x
3.0x 3.2x 3.6x
3.7x 4.
1x 4.9x
4.9x
4.5x 5.
4x
2.8x
3.4x
3.0x 3.
6x 3.8x
3.7x 3.2x
3.7x 4.0x 5.2x 4.
6x7.4x 7.3x
6.0x
6.8x7.4x 7.4x 7.3x
8.6x8.9x
9.7x 10.0x
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Debt/EBITDA Equity/EBITDA Valua�on/EBITDA
Source: PitchBook
*As of 9/30/2017. Deal counts are not estimated, as opposed to overall deal volume.
6 PITCHBOOK 3Q 2017 M&A REPORT
M& A targets are increasingly sophisticatedSpotlight: Target company characteristics
The proportion of target companies
that have institutional backing (i.e.
PE or VC) at the time of acquisition
has risen to an all-time high of
16.9%. Another 3.8% of targets
were publicly traded when the deal
was struck, the highest recorded
since 2009, leaving just 79.1% of
acquired companies that were
neither publicly traded nor had any
sort of private backing—the lowest
on record. If this trend continues
through the fourth quarter, it will
mark the first time the figure has
dropped below 80% for a full year.
In any case, the trend reflects
the growing institutionalization
Source: PitchBook
*As of 9/30/2017
of private markets worldwide.
Particularly in the developed
markets of North America and
Europe, companies are increasingly
traded not between individuals and
families, but rather sophisticated
investors.
Despite the recent appreciation
in price-to-earnings ratios and
continued de-listings in public
equities markets, publicly traded
firms have regained popularity
as acquisition targets in recent
years. As mentioned above, 3.8%
of M&A transactions this year have
targeted publicly traded firms,
up from 3.2% in 2016 and a low
of 2.2% in 2014 (including both
public and private acquirers). The
figure includes divestitures from
publicly traded firms, which are a
popular target for PE firms. That
publicly listed companies are being
acquired at a faster pace despite
higher prices illustrates that
acquirers are willing to pay top
dollar when there are fewer quality
targets available in the market.
Target companies are increasingly institutionalized
M&A activity (#) by target company financing status
10.2%
11.1%
5.3%
5.8%
3.2%3.8%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
PE-backed VC-backed Public
7 PITCHBOOK 3Q 2017 M&A REPORT
Materials & resources boosted by one deal
M&A activity ($) by sector
IT remains markedly resilient
M&A activity (#) by sector
A new high for the middle of the market
M&A activity (#) by deal size
High multiples evident in larger dealsM&A by sector & size
Source: PitchBook
*As of 9/30/2017
Source: PitchBook
*As of 9/30/2017
Sub-$500M activity dwindles
M&A activity ($) by deal size
Source: PitchBook
*As of 9/30/2017
Source: PitchBook
*As of 9/30/2017
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013 2014 2015 2016 2017*
$5B+
$1B-$5B
$500M-$1B
$250M-$500M
$100M-$250M
Under$100M
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013 2014 2015 2016 2017*
$5B+
$1B-$5B
$500M-$1B
$250M-$500M
$100M-$250M
Under$100M
0
5,000
10,000
15,000
20,000
25,000
30,000
2010 2011 2012 2013 2014 2015 2016 2017*
Materials & Resources IT
Healthcare Financial Services
Energy B2C
B2B
$0
$500
$1,000
$1,500
$2,000
$2,500
2010 2011 2012 2013 2014 2015 2016 2017*
Materials & Resources IT
Healthcare Financial Services
Energy B2C
B2B
8 PITCHBOOK 3Q 2017 M&A REPORT
Though overall M&A value has
decreased substantially through
the first three quarters of the
year, the energy and materials
& resources sectors have shown
substantial year-over-year (YoY)
growth. Deal value in the two
sectors has increased 14.7% and
121.6%, respectively, over the same
period last year.
Deal counts fall while value rises
M&A activity in energy, materials & resources
Benefit ing from mega-deals struck this yearSpotlight: Energy, materials & resources
Energy M&A has been bolstered
by a few large deals: Enbridge’s
$43.0 billion acquisition of pipeline
operator Spectra Energy and GE’s
$32.4 billion acquisition of oilfield
services firm Baker Hughes, both of
which are based in Houston. 2016
saw a decrease in the number of
completed oil & gas deals following
the crude oil price crash in mid-
2014, but decreasing break-even
prices and OPEC productions cuts
could spur a renewed appetite for
deals.
By far the largest deal to close in
the materials & resources sector
this year has been ChemChina’s
$44 billion acquisition of
agribusiness giant Syngenta.
The deal is thought to provide
additional food security to China’s
growing middle class, and comes
just after the announcement of two
other agribusiness mega-deals:
Bayer’s acquisition of Monsanto
and the merger of industry giants
DuPont and Dow Chemical.
599
460
0
200
400
600
800
1,000
1,200
1,400
$0
$50
$100
$150
$200
$250
$300
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Materials & Resources Deal Value ($B) Energy Deal Value ($B)
Materials & Resources Deal Count Energy Deal Count
Source: PitchBook
*As of 9/30/2017
9 PITCHBOOK 3Q 2017 M&A REPORT
Financial sponsors increasingly contribute to overall M& APrivate equity
As we’ve noted for the last
couple quarters, PE deals now
represent a larger portion of
the M&A landscape. Financial
sponsors accounted for 31.4% of
all transactions in 3Q 2017, the
highest proportion in our dataset.
The increase is attributable to both
the waning activity from strategic
acquirers in recent quarters, as
well as the relative resilience of
PE deal flow following years of
strong fundraising. Strategics, as
previously mentioned, have slowed
their pace of acquisition as they
integrate new acquisitions into
existing operations following two
years of record-setting M&A. PE
firms, on the other hand, must
return capital to limited partners
(LPs) within a set timeframe, which
creates incentivizes to deploy
capital no matter the economic
environment.
However, a limited timeframe is
not the only factor driving PE’s
influence in M&A. Returns for PE
funds have outpaced most other
asset classes in recent years, and
LPs increasingly see the private
markets as a way to make up for
returns shortfalls in other asset
classes and diversify their equity
holdings. As more capital has
been allocated to the asset class,
the count of companies backed
by PE (aka “company inventory”)
has ballooned in recent years, as
has AUM. As a result, secondary
buyouts have become a more
common way for PE firms to exit
their investments. They accounted
for 52.6% of M&A transactions
stemming from the sale of a PE-
backed company through 3Q 2017,
the highest proportion on record.
Closing in on a third of all M&A activity
M&A (#) by acquirer type
Source: PitchBook
PE-backed exit activity (#) by type
31.4%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
0
1,000
2,000
3,000
4,000
5,000
6,000
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2013 2014 2015 2016 2017
Sponsor-backed Corporate M&A Sponsor-backed %
196
202 24
5
278
227
252
290
298
305
274
276
310
269
303
276
283
293
257
217
262
224 27
3 283
288 28
4 296 32
5
329
332
364 38
9
316 31
5
285
305
245
243
203
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2013 2014 2015 2016 2017
Secondary Buyout Strategic Acquisi�on
Source: PitchBook
10 PITCHBOOK 3Q 2017 M&A REPORT
Methodology
Deal Flow Estimation
Due to the nature of private market
data, information often does not
become available until well after a
transaction takes place. To provide
the most accurate data possible,
we estimate how much of this new
information will become available
in the next quarter by calculating
the average percentage change in
deal flow from the first to second
reporting cycle over the trailing 24
months. We then add this estimate
to the reported figure for the most
recent quarter. Both the original
reported figure and the estimated
figure are provided for your
reference.
Note: Corporate asset purchases
were not considered an eligible
transaction type until the 2Q 2017
edition of this report. As such,
some historical deal flow figures
will have shifted beginning at this
time.
M&A is defined as the substantive
transfer of control or ownership.
We track only completed control
transactions. Eligible transaction
types include control acquisitions,
leveraged buyouts (including
asset acquisitions), corporate
divestitures, corporate asset
purchases, reverse mergers, spin-
offs, and asset divestitures.
• Debt restructuring or any other
liquidity, self-tenders (in which
a company undertakes an offer
for a typically limited number
of its own shares to ward off
a hostile takeover) or internal
reorganizations are not included
• The target company (the
entity being acquired) must be
headquartered in either North
America or Europe
• Announced, rumored or canceled
deals are not included
• Aggregate transaction value is
not extrapolated using known deal
values, unless otherwise noted as
estimated
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11 PITCHBOOK 3Q 2017 M&A REPORT
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