Overall M&A Market Commentary
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The deal volume recorded in 1Q18 reflected another quarter of both lower number of deals and deal dollar value. While the quarterly negative trend in M&A activity which began in 2015 continues, the dollar volume of middle market M&A appears to be leveling off which may signal an activity level market bottom. Middle market M&A activity news, like the recent news on the public equity markets and global/national events, is chaotic and subject to hyperbole. The reported information and news analysis may not reflect the actual deal market story. Furthermore, because of the sensitivity to disclosure of private matters, middle market M&A activity detail is hard to gather. As a result, we believe the databases may not capture all relevant deal activity and the actual trends in middle market deal flow may be obscured.
Lower tax rates on repatriated international profits and corporate earnings in 2018 are expected to free up corporate cash flow and increase larger size M&A deal activity. These lower tax rates coupled with the new tax rules allowing the write off of a large portion of the purchase price in the year of acquisition is expected to further stimulate 2018 M&A activity. Like 2017, deal activity on the larger end of the M&A market is expected to lead the way in 2018. Notable large M&A deals already announced in 1Q18 were Comcast Corp.'s offer to acquire Sky Plc for $30 billion, General Dynamics Corp.’s agreement to acquire CSRA, Inc. for $6.8 billion, General Mills, Inc.'s plan to acquire Blue Buffalo Pet Products, Inc. for $7.8 billion and in the retail space, Albertsons Companies, Inc.'s deal to acquire Rite Aid Corp. for an estimated $2.3 billion.
For additional insight on middle market M&A, valuation multiples, strategic buyer / financial sponsor activity, and more please download the full copy of the Prairie Middle Market Perspective.