Deal Values Soar according to IMAP membershipApril, 2005
New York, April 4 /PRNewswire/ - Gathering in New York City for their annual meeting, 60 leading merger and acquisition advisory firms from around the globe comprising the International Network of M&A Partners (IMAP) today released data from a study showing they completed 190 deals last year worth more than US $5.8 billion, the highest dollar value in the organization's 11 year history. While the total number of middle market merger and acquisition deals completed was down slightly over 2004, their total value soared by more than 67%. The average transaction size was $30.5 million. In 2003, IMAP members completed 210 transactions worth $3.47 billion.
According to Peter Anania, IMAP board member, "We expect 2005 to surpass 2004 in almost every aspect. All of the conditions representative of a vibrant M&A market are in place around the globe."
2004 saw selling multiples on the increase again throughout the IMAP network. North American members reported selling multiples of between five and seven times EBIT (earnings before interest and taxes) which was up about 3/4 of a multiple from 2003. European IMAP members reported EBIT multiples of between 5.3 and 6.8 times for transactions under $50 million and multiples of 7.7 times EBIT for transactions over $50 million. This was also an increase over 2003.
Other trends emerging from the study include:
- IMAP members witnessed an increase above 2003 of foreign buyers and more globalization in the middle market.
- The trend of more private equity sellers to private equity buyers is expanding.
- More buyers are seeking to purchase market share and expand into new markets through acquisition.
- Significant money is seeking few high quality deals.
- More Asian firms are looking for opportunities to buy overseas.
MBOs dominate in Europe
Private equity-backed management buyouts dominated the European M&A market in 2004. Across Europe, the number of MBOs rose significantly. Private equity groups faced little competition and continue to have available resources. Moreover, bank loans were relatively easy to obtain at low interest rates. In the second half of the year, strategic buyers were returning to the market. Due to recovering profitability and improved economic outlooks, European cross border transaction values increased by 20%. "In Europe, the overall climate remains a buyer's market and our expectations for 2005 are optimistic, though some questions remain concerning mid-market company successions, observed OddbjÃ¸rn Skredderberget, IMAP Chairman. "We believe corporations will continue to divest non-strategic assets in the coming year and expect to see consolidation among the business services, information technology and financial services areas."
Asia-Pacific economies recover
2004 and the first 3 months of this year have seen a significant increase in M&A activity in Australia and much of Asia. In Asia, this resurgence of activity is a result of a number of reasons, including the recovery of national economies from the Asian economic crises. China and Thailand have powered much of this recovery. Additionally, U.S. and European manufacturers have continued to source more of their manufacturing activities in the region, particularly in China. Finally, "There is growing evidence of a generational change taking place in Asian businesses where the new generation is focused on key business assets and is prepared to dispose of historical (but non-core) assets," noted Ambrose Lam of Hong Kong's Access Capital Limited, an IMAP partner firm. "This is something previous management was unwilling to do. We expect the remainder of 2005 to be extremely busy."