The State of Middle Market M&A: Q2 2017


Middle Market M&A activity grew in June for the thirteenth month in a row, according to Mergers & Acquisitions’ M&A Conditions Index (MACI). In fact, the first half of 2017 was the Middle Market’s most productive first half in 10 years according to the MACI.

From our offices, our Q1 and Q2 deal activity has been aligned with the trends observed in the MACI reports. The broader M&A data and our recent direct experience align with our advice to business owners who are in a position to consider a sale. The window is wide open to capitalize on record high valuations and seller-favorable deal terms.

Below are our top 3 takeaways from the first half of 2017.

#1: The start of 2017 was more productive than the same period of 2016.

According to Thompson Reuters, there were 5,260 deals completed in the first six months of 2017. This is a 12% increase from the same time period of 2016.

#2: There are specific factors that are contributing to the current favorable M&A Market.

Private Equity firms have experienced prosperous fundraising in 2017. To be exact, 412 worldwide funds have closed, raising a collective $221.4 billion, unseating the previous record of $220.8 billion raised in 2008, according to Preqin. Private equity funds typically aim to announce favorable exit events and new acquisitions in preparation for, and immediately following fundraising. The supply of dry powder and the urgency on behalf of private equity groups in fundraising mode is spurring deal activity.

Interest rates remain low and sellers are optimistic that tax law changes in 2017 will benefit the after-tax proceeds from a sale. Both of these factors are keeping the environment healthy for deal activity.

Middle Market business owners are aging and do not have concrete plans to transition ownership to the next generation. Of the family-owned companies that plan to transition ownership within the next five years, just 52% expect to keep the business’ ownership in the family, according to a recent study on succession planning for U.S. family-owned businesses by PwC. This is the lowest rate seen since 2010. You can take a deeper dive on this topic here.

#3: The second half of 2017 will likely have the same energy as the first half of the year.

We don’t see any sign of the current M&A activity slowing down. This being said, no one can predict future economic, political or your personal conditions. It is best to ensure you are prepared with the most accurate data and various options available as you continue to build your strategic business plans and timeline.

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