In this Q2 2022 update, we provide data and highlights for Southeast (Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, South Carolina and Tennessee) middle-market (total transaction value < $USD 500mm) M&A transactions, including volume, value and enterprise value multiples. This update focuses on M&A trends in the energy, materials, industrials, consumer discretionary, consumer staples, health care, financials, information technology, communication services, utilities and real estate industries.
Highlights
Total M&A volume increased by 4.9%, from 406 transactions in Q2 2021 to 426 transactions in Q2 2022, largely driven by a 400% increase in the materials industry, from 4 transactions in Q2 2021 to 20 transactions in Q2 2022
Total reported M&A value decreased by 37.1%, from $5.2 billion in Q2 2021 to $3.3 billion in Q2 2022, mainly due to a substantial decrease in the industrials industry, from $1.2 billion in Q2 2021 to $181 million in Q2 2022
Average reported transaction size decreased by 23.4%, from $67.1 million in Q2 2021 to $51.4 million in Q2 2022
Average reported enterprise value (“EV”)-to-revenue multiples decreased from 5.2x in Q2 2021 to 1.8x in Q2 2022
Average reported EV-to-earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples decreased slightly from 10.8x in Q2 2021 to 10.0x in Q2 2022
Q2 2021 vs. Q2 2022
Volume, Value and Average EV Multiples
M&A volume involving strategic buyers increased from 334 transactions in Q2 2021 to 358 transactions in Q2 2022 (7.2%), while M&A volume involving financial buyers decreased from 58 transactions to 52 transactions (10.3%) over this same time period
Reported M&A value involving strategic buyers decreased from $4.6 billion in Q2 2021 to $2.2 billion in Q2 2022 (52.9%), while M&A value involving financial buyers increased from $452.5 million in Q2 2021 to $1.05 billion in Q2 2022 (131.4%)
Average reported transaction size involving strategic buyers decreased from $70.1 million in Q2 2021 to $47.4 million in Q2 2022 (32.5%), while average reported transaction size involving financial buyers increased from $56.6 million in Q2 2021 to $74.8 million in Q2 2022 (32.2%)
Average reported EV-to-revenue multiples for transactions involving strategic buyers decreased from 5.2x in Q2 2021 to 1.8x in Q2 2022
Average reported EV-to-EBITDA multiples for transactions involving strategic buyers decreased from 10.8x in Q2 2021 to 9.3x in Q2 2022
Source: Capital IQ
M&A Insights from Bennett Thrasher
Using F Reorganization Strategically in Mergers & Acquisitions Transactions [here]
Successfully Transition Ownership by Knowing Your Options [here]
Robinhood’s IPO Filings Highlight Risks Faced by Investors [here]
Better Together Spotlight: Tax Transaction Advisory Services Assists PE Firm in Acquiring a SaaS Company
Bennett Thrasher recently worked with a private equity client in acquiring a majority position in the stock of a SaaS company. Our team assisted in evaluating the tax implications of the acquisition and conducted federal and state tax due diligence. Specifically, we evaluated whether the investment would qualify for IRC Section 1202 qualified small business stock treatment. With the target company having substantial net operating losses, we also evaluated the potential tax attribute limitations under IRC Section 382 resulting from our client’s acquisition. During due diligence, although the target company had implemented state sales tax compliance procedures, we estimated a significant sales tax exposure for prior years while also identifying how the target company might be able to best mitigate the potential exposure. As a result of our services, the client was able to consider potential tax saving strategies, understand limitations in using tax attributes post-transaction, and navigate discussions with the target company of how best to address prior period tax exposure pre- and post-close.
Our M&A Advisory Services
For most business owners, a merger or acquisition is the most significant financial event of their lifetime. Buyers and sellers face many hurdles in reaching their goals of maximizing business value and minimizing risk. The experience of transaction advisors can be instrumental to achieving these goals.
Our team is comprised of dedicated advisors that can assist you across various stages of your transaction process, including:
Financial due diligence
Tax due diligence/structuring and valuation
Sell-side readiness
Exit planning
If you are embarking on a transaction opportunity, please contact one of our M&A Advisory Services leaders by calling 770.396.2200.
