United States

Q3 2016 Business Products and Services Industry Spotlight


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In the midst of a market environment that can give conflicting growth signals, the business products and services (B2B) sector continues to grow in lock-step with the global economy, which at the moment is moving in a minimal-growth trajectory. While smaller, lower middle-market businesses can find themselves immune to an extent from the troubles multinationals may face with diverging global economic landscapes, global trends certainly still impact deal-maker sentiment, and transactions are taking longer to close as a result.

The decision of Great Britain to exit the European Union has triggered an unleashing of fears about the European sovereign debt crisis and the condition of the continental banking system, which will likely result in the need to recapitalize the European banking system by year-end. The decision has also further incentivized capital flows to travel to the United States, only adding fuel to an already strong U.S. dollar. This currency component has become a hindrance for many core middle-market companies with domestic cost structures yet growing foreign operations, and both buyers and sellers should take notice.

Key highlights from the second quarter:

  • Aggregate mergers and acquisitions volume in the second quarter slid considerably, with a colossal 31 percent quarter-over-quarter (QoQ) decline in total volume. On a yearly basis, transaction counts were down nearly 37 percent.
  • The median valuation-to-EBITDA figure midway through 2016 came in at 10.3x, roughly 10 percent higher than the 9.4x multiple recorded in 2015.
  • The second quarter saw a total of seven IPOs close, a resurgence from the single offering in the first quarter. In the aggregate, $1.8 billion was raised across those seven offerings, the most raised in any quarter in just over two years’ time.

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