SourceMedia, a diversified provider of B-to-B news, analysis and marketing services, reported a solid uptick for the Mergers & Acquisitions Conditions Index (MACI). The composite reading for February was 57.9, compared to January’s 54.3, led by indicators that track early-stage deal flow.
The M&A Conditions Index (MACI) is a barometer to gauge mid-market mergers and acquisitions activity. The MACI is powered by surveys of the company’s unique and qualified professional audiences in private equity, corporations, investment banking, law firms and other M&A advisory areas. The February reading was based on a survey of 245 dealmakers.
“The February MACI yielded a composite score of 57.9, reflecting a healthy increase in dealmaking activity,” said Mary Kathleen Flynn, editor in chief of SourceMedia’s Mergers & Acquisitions publication.
(View article: http://www.themiddlemarket.com/maj/2011_67/mid-market-ma-conditions-index-248240-1.html )
Two factors, Leads and Signed Letters (of Engagement and Intent), had the largest impact on the MACI. Leads climbed to 73.6 in February from 60.7 in January. Signed Letters had a similar trajectory with a reading of 65.3 in February compared to 56.5 in January. “These indicators are in keeping with the optimism dealmakers have expressed about 2014 in many of our recent surveys and interviews,” Flynn said.
INSIDE THE MACI
The MACI is a diffusion index. Readings above 50 indicate an expansion in M&A activity and readings below 50 indicate a contraction. A reading of 50 indicates there was no change month-to-month. The further from 50 a reading is, the stronger the indicated change.
Monthly readings are presented as a time series that can be used to monitor the prevailing rate and direction of change in M&A activity and eventually to benchmark whether an institution is operating in line with overall industry trends.
The index was created by SourceMedia Research in collaboration with the editors of Mergers & Acquisitions. In addition to the M&A Conditions Index, SourceMedia publishes indices for banking, mobile banking, accounting and other key sectors.
The M&A Conditions Index is a composite of multiple business metrics within its sector, measured through monthly surveys of executives in relevant markets. It is constructed to reveal and track patterns that enable professionals to better understand and anticipate peaks and troughs in their core activities. The MACI comprises a number of select sub-indicators that summarize various M&A activities, including deals shown, letters of intent, acquisitions and divestitures.
Values for each component of the index are equal to the percentage of responses indicating increased activity, plus half of those indicating “no change”. Weighted component scores are then averaged to arrive at the composite score. When calculating the composite, contrary indicators are scored inversely – the component score is subtracted from 100.
A LOOK AT THE NUMBERS
The February composite reading of 57.9 is a reflection of the questions asked of survey takers. Topics include the number of companies a firm has put up for sale, number of deals completed, ease of obtaining financing, number of bidders, and actionable leads.
While most components showed growth, Completed Deals yielded a score of 47.9, down in February from January’s reading of 56.5. “The beginning of a year is typically a slower period for closed deals, following the traditional end-of-the-year scramble to wrap up transactions,” Flynn said.
Staffing, which is a critical part of the index, rose in February to 56.5 from 52 in January.
WHAT RESPONDENTS ARE SAYING
Survey respondents are encouraged to add verbatim comments to their answers. In 2013, dealmakers expressed optimism about 2014. They continue to do so now that we have started into the year.
“Conditions remain steady and favorable,” one respondent said. Another went further, noting “increased deal flow to consolidate and use cash on the balance sheet.” The dealmaker added that “valuations are relatively stable.”
“The leading catalyst for deals in 2014 will be large cash reserves,” an M&A advisor said. “Firms are looking to expand into new markets and lines of business.”
Another agreed: “Deal activity is affected by availability of suitable targets at a reasonable price, market conditions and extent to which my company is under pressure to do something with cash.”
Some firms say they are hiring staff to handle their projected boost in activity. “We hired a strategic analyst to improve acquisition processes,” one commented. Meanwhile, another respondent said, “We have added two additional full-time employees to the M&A team within corporate development to increase M&A activity and to help drive strategic growth.”
About SourceMedia Research
SourceMedia Research was launched in 2010 to operate in tandem with the company’s existing news and analysis, events and marketing solutions operations. Building on SourceMedia’s strong audience communities, and working closely with its editorial teams, SourceMedia Research provides a full range of industry-standard capabilities, including quantitative and qualitative surveys, data analysis, panel management, and white paper development. Surveys are developed independently by our subject matter experts, as well as in consultation with syndicate partners and clients. Data and insight derived from SourceMedia’s research studies can support strategic and tactical decision-making, product development and demand analysis, and the creation of custom research, thought-leadership and positioning programs.
SourceMedia (http://www.sourcemedia.com), an Investcorp company, is a business to business media company serving the financial industry and the related fields of professional services and technology. SourceMedia offers clients and subscribers professional information services, industry-standard data applications, in-depth seminars and conferences, research, and specialized marketing services.
About Mergers & Acquisitions
Mergers & Acquisitions covers all aspects of middle-market dealmaking, including identifying acquisition targets, negotiating transactions, performing due diligence, and closing deals. Serving nearly 18,600 print subscribers, our monthly magazine is published in partnership with the Association for Corporate Growth (ACG), a global organization comprised of thousands of private equity firms, corporate officials and intermediaries. With more than 25,000 unique monthly visitors, themiddlemarket.com is continuously updated, providing real-time information and analysis of news and trends in M&A. Our online video series features interviews with high-profile dealmakers, including private equity partners, strategic buyers, investment bankers and other advisers.
For more information, please contact:
Mary Kathleen Flynn
Editor in Chief, M&A