2016 Annual Business Products and Services Industry Spotlight
INSIGHT ARTICLE |
Against a backdrop populated by the ever-present specter of volatility and political uncertainty tinged with hopeful optimism, there is evidence to suggest that void of any massive shocks, businesses will continue to move cautiously. However, as in any volatile era, each business and products sector must be taken separately, given the potential for certain public policy initiatives to transform demand dramatically.
The magnitude and timing of U.S. economic policy changes are uncertain. Be it rumored changes around an infrastructure bill that could provide a massive boost to construction and telecommunications firms or potential border-adjusted tax reform that pose to negatively impact globally operating enterprises, the only known element is that it’s a waiting game of sorts. As such, players will continue to execute on what initiatives are safest or necessary.
With respect to industry-specific merger and acquisitions activity, key highlights include:
- Despite the rebound in deal value to historically healthy levels, only 547 M&A’s closed for approximately $44.6 billion in aggregate value in the final quarter of 2016, the fewest completed transactions within the B2B sector over the past four years.
- The ongoing phenomenon of a bifurcation in the quality of companies continued in the fourth quarter. Slackening transactional volume coupled with deal multiples of valuation-to-EBITDA hitting a new high of 9.9x clearly suggests that there is still avid demand for the better businesses but a lack of them.
- Consistent with the past eight quarters, the quarter-over-quarter fluctuation in initial public offering (IPO) activity in the B2B industry has been dramatic, with volume zig-zagging back and forth between five to 10 debuts, and aggregate offering value even more varied.
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