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A Look Back & A Look Forward

2018 M&A Outlook

2017 was yet another strong year for M&A professionals. Whether the market is “melting up” or we are in “the new normal,” middle-market deal makers can clearly agree that the sellers’ market continued in 2017. Interestingly, the total number of global transactions was up by 3.1% in 2017 to 14,096 while the US middle market was down 4.4% to 3,424. That said, it sure didn’t feel like a down year in the U.S.

2017 was a year of jaw dropping transaction values. Valuations expressed in EBITDA multiple terms were often in the double digits. The median US middle-market industrial EBITDA multiple was 9.5 times in 2017, its highest in the last 6 years.

Why are valuations so robust?

Three key factors drove the value escalation.

First, demand continues to outpace the supply of transactions. With strategics aggressive in the market, new private equity funds sprouting, and the continued evolution of the family office competing in an already crowded private equity market, the demand for deals is outpacing the supply, leading to buyers to pay up in this market.

Second, the availability of capital and respective terms in the leverage market continues to stoke the M&A fire.

Third, organic growth is very tough to accelerate. M&A is playing a larger role in the growth plans of many of the businesses we see in the market. Whether this is speed, ease of execution, or something else, buying versus building is to be on the rise. These factors are all pushing valuations higher.

2017 also saw hyper broad and robust processes. Large sets of buyers, extensive numbers of management meetings, and buyers competing through to the closing, made it even more difficult for buyers to win auction processes and - more expensive to lose. The efficiency in the middle-market of sell-side processes continues to increase, also leading to higher pricing.

The question we regularly get asked is “how long will this bull M&A market run?” We expect 2018 to be another strong M&A year as the market attributes are all in place:

Available, flexible debt capital
Outsized comparative returns on M&A
Excess cash on balance sheets
Need for growth… both domestic and international
Baby boomer’s need for liquidity
The building M&A muscle
Tax policy

A different question is, what are the negatives in this sellers’ market. The only one we see, is the potential for value expectation disconnect of sellers. That said, with the sun, the moon and the stars aligned, our global team is eager to advise our clients in 2018 in what we expect to be another robust seller's market.

A bank club was assembled for global assembly integrator, sequencer and supply chain manager, Android Industries

Apache was acquired by Motion Industries, Inc.-a wholly-owned subsidiary of Genuine Parts Company

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Our Team

Livingstone is strategically positioned in Beijing, Chicago, Los Angeles, London, Madrid, Dusseldorf and Stockholm, and is a long-standing leader in cross-border and domestic M&A for the industrials sector, with over 275 successfully completed transactions.

Our Global Industrials Group provides strategic advice and seamless transaction execution to private business owners, financial sponsors, and major corporations across Europe, North America and Asia.