Early-stage deal flow grew in November but at a slower pace than in October, as attention shifted away from sourcing deals to closing them by year’s end, according to SourceMedia’s Mergers & Acquisitions Conditions Index (MACI).
“The scores reflect a natural shift in focus from deal sourcing to deal closing that occurs typically at the end of the year,” said Mary Kathleen Flynn, Editor-in-Chief of SourceMedia’s Mergers & Acquisitions publication.
The M&A Conditions Index (MACI) is a barometer to gauge mid-market mergers and acquisitions activity. The MACI is powered by surveys of Mergers & Acquisitions’ audience of unique and qualified professionals in private equity, corporations, investment banking, law firms and other M&A advisory areas. The November reading was based on a survey of more than 250 dealmakers. For a complete analysis of the MACI’s most recent data, visit: http://www.themiddlemarket.com/MACI_November
The MACI Composite Score registered 56.8 in November, a drop from October’s reading of 59.9. Flynn attributes the dip to lower scores in the Leads and Signed Letters components. Leads scored 62.4, a notable decline from October’s reading of 73.2. Signed Letters also were down, registering 57.5 against October’s 67.3.
Completed Deals was one of the only components up, with a spike to 64 from the previous month’s 57.7.
December may be more fruitful, Flynn said. “In 2013, October and December each delivered 260 deals, making them among the year’s most successful months when it comes to inking middle-market transactions.”
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. 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.
What Respondents are Saying
Survey respondents are encouraged to add verbatim comments to their answers. In October, dealmakers expressed concern about the election, but in November, with a Republican-led House and Senate in the wings, many were more optimistic.
“We believe the recent mid-term elections in the U.S. could positively impact the economic conditions and further increase the amount of deal activity going forward,” one respondent said. Another commented that “tax and regulatory policies will be evolving given the new political makeup in D.C.”
A few dealmakers remarked that economic stabilization will affect deal multiples. “Multiples remain high due to cheap debt and large amounts of dry powder on the sidelines,” a dealmaker commented. “As unemployment numbers decrease and the U.S./global economy improves, we expect rates to increase and multiples to decrease.”
SourceMedia, an Observer Capital company, is a diversified business-to-business digital media company serving senior professionals in the financial, technology, and healthcare sectors. Brands include American Banker, The Bond Buyer, Mergers & Acquisitions, Financial Planning, On Wall Street, Accounting Today, Health Data Management, and Employee Benefit News. Information about SourceMedia is available athttp://www.sourcemedia.com.
About SourceMedia Research
SourceMedia Research, a unit of SourceMedia, provides research solutions for marketers, agencies and others targeting business sectors such as banking, payments, mortgage, accounting, insurance, employee benefits and investment advisor / wealth management. SourceMedia Research specializes in reaching senior and C-level decision makers through access to its large proprietary opt-in databases and panels.
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
Executive Director of Marketing