SourceMedia’s Mergers & Acquisitions Conditions Index (MACI) edged higher in July, boosted by a rise in early-stage deal flow. The increase indicates that mid-market dealmakers are generally optimistic that the momentum experienced in the first half of the year is likely to extend over the remainder of 2014.
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 July reading was based on a survey of 253 dealmakers. For a complete analysis of the MACI’s most recent data, visit:http://www.themiddlemarket.com/MACI-August14.
“The pace of growth in overall deal flow picked up again in July after a seasonal slowdown in June, demonstrating that the underlying conditions for M&A remain strong,” said Mary Kathleen Flynn, Editor-in-Chief of SourceMedia’s Mergers & Acquisitions publication.
Leads and Completed Deals also rose in July, registering scores of 67.2 and 53.7 respectively. Meanwhile Signed Letters lagged at 58.8, according to the July MACI.
“The early-stage growth shown in most of the MACI scores for July suggests that the momentum in the middle-market transactions that characterized the first half of 2014 may continue in the second half,” 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. 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.
A Look at the Numbers
The July Composite score of 57.6 was an increase over June’s 56.0, but didn’t reach as high as May’s 57.9. “The Composite score indicates that the pace of expansion in overall deal flow sped up again in July, after a dip at the beginning of the summer in June,” Flynn said.
Early-stage deal flow continued to expand in July, as illustrated by Leads, which registered 67.2 in July compared to 65.6 in June.
Dealmakers reported fewer Signed Letters in July, reflecting a holdover from the June slowdown in growth, according to Flynn.
The index’s Bidders component also dropped, to 62.2 in July against June’s 68.7 reading. Fewer bidders per deal indicate a healthier M&A market, which is why this component is calculated as a contrary indicator in the Composite.
What Respondents are Saying
Survey respondents are encouraged to add verbatim comments to their answers. Though optimistic about the next six months, dealmakers are wary about a possible spike in long-term interest rates. “Changes in interest rates will impact both leverage and acquisition multiples,” one respondent said.
Another noted: “We are seeing increased demand from sellers who are now considering to sell based on increased multiples.” The same respondent said it was critical to jump on that demand while debt is still at historic lows.
Other dealmakers cautioned that regulation still has a heavy hand on the market and, as one remarked, “continues to be a drain on activity.”
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.
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 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.
Exec Director Research & Data