According to the fifth report in SourceMedia’s Mid-Market Pulse (MMP), dealmakers expect M&A in the energy section to fall behind the overall market and other high-growth sectors such as healthcare and financial services over the next 12 months. The MMP, published by Mergers & Acquisitions in partnership with McGladrey LLP, is a forward-looking sentiment indicator that monitors near-and intermediate-term outlook for merger and acquisition activity within the middle market.
“Dealmakers expect M&A in the energy sector to grow over the next year but at a slower pace than the overall market and other high-growth sectors,” said Mary Kathleen Flynn, editor-in-chief of Mergers & Acquisitions. “The energy sector has seen a lot of M&A activity over the last few years, but the results of the MMP suggest the peak may have passed.”
The 3-month composite score for energy was 68.5, considerably lower than the index’s overall 3-month composite score of 75.1. The 12-month outlook was similar with energy delivering a composite score of 67.7 compared to the overall composite reading of 70.8.
Each month, the MMP index spotlights an individual industry and presents respondents’ expectations for deal activity within that specific sector. This month’s index focuses on the energy sector.
Deal multiples showed the least growth of components in the energy sector, according to Flynn. Deal multiples scored a 57.4 in the 3-month outlook and 51.3 in the 12-month forecast. “The relatively low scores for deal multiples suggest that deal prices in the energy sector are flattening out after having risen over the last couple of years,” Flynn said.
For a complete analysis of the MMP’s most recent data, go to: http://www.TheMiddleMarket.com/mmp-TMT.
Inside the MMP
The Mergers & Acquisitions Mid-Market Pulse (MMP) is a monthly barometer of sentiment in the mergers and acquisitions business derived from monthly surveys of approximately 250 executives in private equity firms, investment banks, lenders, and advisory firms in accounting, law, and consulting.
Based on a regular set of recurring questions about expectations and trends across a range of key issues in M&A, the MMP is a leading indicator for potential changes in momentum in M&A activity. Various indicators that make up the MMP include projected deal volumes and pricing, staffing resource utilization levels, and the expected impacts of economic conditions, taxes and regulatory policy on future M&A activity.
Survey responses describe expectations and outlooks for three- and 12-month forward periods to arrive at indicator scores. Respondents also are asked to elaborate on their responses and provide opinions about other conditions that affect their M&A outlook.
A Look at the Numbers
In the near term, the energy sector scored higher than the overall market in two components: economic impact and tax impact. In deal value, energy sector fell short of the overall market, registering 70.9 compared to 79.2.
The longer view for the sector was more dismal as no components in energy scored higher than the overall market.
What Respondents are Saying
Survey respondents are encouraged to add verbatim comments to their answers. Many said oil demand, the economy and global instability will affect the energy sector.
One respondent worried about “the volatility in global oil prices” while another cited “geopolitical developments”.
“A combination of increased regulatory scrutiny and uncertainty in certain parts of the world will negatively influence activity and valuations in the energy sector,” one dealmaker said.
Others are holding on for “new forms of energy and new technology.”
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.
McGladrey LLP is the leading U.S. provider of assurance, tax and consulting services focused on the middle market, with more than 7,000 people in 75 cities nationwide. McGladrey is a licensed CPA firm and serves clients around the world through RSM International, a global network of independent assurance, tax and consulting firms. McGladrey uses its deep understanding of the needs and aspirations of clients to help them succeed. McGladrey serves private equity firms and their portfolio companies with integrated transaction advisory, tax, assurance and consulting services. Clients benefit from a single-point-of-coordination service model and teams that operate as strategic partners throughout the private equity life cycle. For more information like us on Facebook at McGladrey News, follow us on Twitter @McGladreyPEand/or connect with us on LinkedIn.
Exec Director Research & Data