M&A Quarterly – March 2019
by Corey Vanderpoel
Market Summary
- TEV/EBITDA in Q4 2018 increased to 7.8x from 7.3x in the prior quarter and averaged 7.2x for all of 2018, which is in line with the prior year of 7.3x.
- The two industries showing the highest EBITDA multiples during 2018 were technology and media & telecom at 9.6x and 8.6x, respectively. EBITDA multiples for all manufacturing companies averaged 6.9x, which is 0.8x above historical averages.
- On average, larger buyouts receive a premium to their EBITDA multiples. The spread on size premiums for larger deals between $50 and $250 million compared to deals between $10 and $50 million was 2.9x in 2018 YTD, which is above the average historic level of 2.3x.
- Buyers continued to reward businesses with premiums for above-average financials (TTM revenue growth and EBITDA margins above 10% or one above 12% and the other 8%) during 2018. Buyouts for businesses with above-average financials averaged 7.9x vs. 7.2x for all others, a premium of 10%, which is in line with 2017.
- Platform buyouts averaged a higher EBITDA multiple than add-ons during Q3 2018, 7.4x compared to 6.9x, respectively.
- Debt utilization ticked up slightly in Q4 2018 with senior debt/EBITDA multiples across all industries at 2.9x compared to 2.7x the prior quarter; however, this is below the average during 2017 of 3.4x.
- Average equity contributions increased to 48.6% in 2018; for reference, equity contributions had remained remarkably consistent in the 44-45% range over the prior three years.
What’s new at Taureau Group
- December – Completed the sale of an industrial manufacturer to a company in the power industry.
- January – Taureau Group announced ownership change and full independence as Ann Hanna & Corey Vanderpoel entered into an agreement to purchase the remaining shares held by Schenck SC.
- January – Brock Childers promoted to Associate.
- February – Completed the sale of an industrial coatings company to a private buyer.
- February – Complete valuation assessment for a company in the coatings and adhesive industry.
- February – Sponsored and presented to attendees at Manufacturing Matters! 2019 WMEP event.
- March – Engaged by a company in the transportation industry for consideration of potential sale.
- March – Engaged by an industrial machinery company for consideration of potential sale.
M&A activity remained robust in 2018 with North America and Europe recording its fifth consecutive year of total deal value exceeding $3 trillion. Transaction multiples though have begun to stabilize since the record highs achieved in mid-2017.
Active Broad Acquisition Searches
- Add-on opportunities for buy-side clients in the plastics manufacturing and niche technology/automation industries.
- Add-on opportunities for buy-side client looking for engineering or architectural service firms with revenues between $2 million – $15 million.
FEATURED ARTICLES
- Due Diligence Expectations. Go to: taureaugroup.com/due-diligence
- Driving Value in Manufacturing. Go to: taureaugroup.com/driving-value
Market Statistics
Total Enterprise Value (TEV)/EBITDA*
| TEV | ’03-13 | ’14 | ’15 | ’16 | ’17 | YTD’18 | Total |
|---|---|---|---|---|---|---|---|
| 10-25 | 5.5 | 5.5 | 5.9 | 5.8 | 6.3 | 5.8 | 5.6 |
| 25-50 | 6.1 | 6.4 | 6.6 | 6.4 | 6.6 | 6.9 | 6.3 |
| 50-100 | 6.7 | 7.6 | 7.8 | 7.2 | 8.2 | 9.0 | 7.2 |
| 100-250 | 7.2 | 7.5 | 9.0 | 8.9 | 9.1 | 8.8 | 8.0 |
| Total | 6.1 | 6.4 | 6.7 | 6.7 | 7.3 | 7.2 | 6.4 |
TEV/EBITDA—By Industry Category*
| Industry | ’03-13 | ’14 | ’15 | ’16 | ’17 | YTD’18 | Total |
|---|---|---|---|---|---|---|---|
| Manufacturing | 5.9 | 6.1 | 6.6 | 6.1 | 6.8 | 6.9 | 6.1 |
| Business services | 6.1 | 6.1 | 6.4 | 7.3 | 7.5 | 7.2 | 6.4 |
| Health care services | 6.8 | 7.2 | 7.8 | 7.6 | 8.1 | 7.8 | 7.2 |
| Retail | 6.4 | 6.0 | 5.5 | 7.0 | 7.6 | 7.0 | 6.6 |
| Distribution | 6.0 | 7.2 | 6.7 | 7.5 | 7.7 | 7.1 | 6.5 |
| Media & telecom | 7.2 | NA | 6.4 | 6.6 | 8.2 | 8.6 | 7.2 |
| Technology | 6.6 | 7.7 | 8.0 | 7.4 | 10.2 | 9.6 | 7.7 |
| Other | 5.8 | 6.6 | 5.6 | 6.9 | 6.5 | 7.1 | 6.1 |
Senior Debt/EBITDA—Splits by Period*
| TEV | Q117 | Q217 | Q317 | Q417 | Q118 | Q218 | Q318 | Q418 |
|---|---|---|---|---|---|---|---|---|
| 10-25 | 3.2 | 2.7 | 4.3 | 3.8 | 2.8 | 3.9 | 2.5 | 2.1 |
| 25-50 | 2.7 | 3.2 | 2.7 | 2.9 | 3.1 | 2.8 | 2.5 | 2.5 |
| 50-100 | 2.9 | 4.5 | 3.0 | 3.8 | 4.0 | 3.2 | 2.6 | 3.5 |
| 100-250 | 3.7 | 3.9 | 4.1 | 3.5 | 5.2 | 3.2 | 3.7 | 3.4 |
| Total | 3.0 | 3.6 | 3.6 | 3.4 | 3.3 | 3.2 | 2.7 | 2.9 |
*Source: GF Data®. Information included from GF Data may not be used or re-published without permission from GF Data or Taureau Group.
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