M&A Deal Volume and Spending: All Industry Sectors

The following article is from Software Equity Group’s 2011 Q3 Software Equity Industry Report.  A complimentary copy of the quarterly report can be downloaded here: https://softwareequity.com/research_reports.aspx

Globally, the third quarter’s 12,142 M&A transactions across all industry sectors eclipsed the previous post recession peak of 11,722 transactions set in 1Q11.  3Q11’s tally represents a 23% YoY increase from 3Q10’s 9,872 M&A transactions, and a 5% gain over 2Q11’s 11,515 M&A transactions.  Despite the record number of worldwide M&A transactions, the total spend of $606 billion in 3Q11 was 10% lower than 2Q11’s $671 billion, and 12% off 1Q11’s post-recession peak of $691 billion.

Domestically, 4,089 M&A transactions were announced across all industry sectors in the third quarter of 2011 (Figure 23).  The 3Q11 U.S. deal total was down slightly from 2Q11’s 4,202 transactions, but up 21% year over year.  Mirroring the rapid pace of transactions internationally, domestic M&A transactions are also heading for record volume this year.  In 1Q11, there were more than 4,000 domestic deals, the highest domestic deal volume we’ve reported since we began tracking this metric in 2001.  The second and third quarters each exceeded 4,000 transactions, as well. Perhaps as important, buyers loosened their purse strings over the past year.  In 3Q11, acquirers’ spent an aggregate $304 billion on 4,089 transactions, a whopping 35% more than 3Q10’s total price tag of $225 billion.  Average deal size also jumped, reaching $75 million in 3Q11, up from $67 million in 3Q10.

There were 622 worldwide leveraged buyouts in 3Q11, totaling $20.8 billion, compared to 658 worldwide LBOs worth $32.1 billion in 2Q11, and 695 in 1Q11 aggregating $25.5 billion.  The number of U.S. LBOs dropped to 213 in 3Q11 from 240 in 2Q11 and 233 in 1Q11.  The total spend on U.S. LBOs in the third quarter was $15.3 billion, down from $17.3 billion in 2Q11 but still considerably greater than the $13.1 billion total spent in 1Q11.  The drop in deal volume suggests PE buyers may be having a difficult time finding attractively priced targets in the face of rising valuations.  The largest LBO in 3Q11 was Apax Partners’ $5.8 billion acquisition of Kinetic Concepts, at 2.7x TTM revenue, a relatively high valuation of for a financial buyer.

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