CCCA Economic Dashboard: January 31st, 2014

Below is the CCCA economic dashboard as of January 31st, 2014. Click here to view a larger image.

CCCA Economic Dashboard: January 10th, 2014

Below is the CCCA economic dashboard as of January 10th, 2014. Click here to view a larger image.

CCCA Economic Dashboard: January 3rd, 2014

Below is the CCCA economic dashboard as of January 3rd, 2014. Click here to view a larger image.

CCCA Economic Dashboard: December 27th, 2013

Below is the CCCA economic dashboard as of December 27, 2013. Click here to view a larger image.

KPMG: Deal Activity in 2014 Expected to Improve

KPMG recently released the results of a survey given to over 1,000 deal makers with regards to 2014 M&A prospects. In short, deal activity is expected to improve in 2014. However, 2013 was also heralded by many as the year that would see M&A really take off and it didn't quite come to fruition.  Several mega-deals notwithstanding, 2013 fell short of expectations. So what makes 2014 different?   According to the survey, deal makers felt relatively positive about the environment and 63% of respondents said they planned to be acquirers in 2014. Most of this optimism was the result of large cash reserves, favorable/available credit terms, improving equity markets and improved overall confidence. However, as one investment banker put it, deals should most likely increase "because next year can't possibly be as bad as this year." This is where the questions really start. Many of the economic drivers present at the beginning of 2014 were also present in 2013. Private equity has piles of dry powder, corporate balance sheets are stocked with cash and money is cheap to borrow. However, all of these factors were also present in 2013. Instead of an increase in overall activity, we saw an increase in PE exits. So why would activity suddenly increase? According to the results below, most respondents expected targets to "become available." From our experience in the market, there are plenty of motivated buyers, but quality companies wanting to sell have been scarce. If this situation changes in 2014, the activity will most likely be very high. Some companies that we've spoken to have been anxious to eclipse pre-recession levels before having a liquidity event. Others are optimistic about the market in general, and want to leverage their growth opportunities utilizing cheap borrowed capital. The latter of those reasons won't change in 2014, but if some companies reach their targeted EBITDA numbers, sales could increase.   Click here to read the full report from KPMG. Hopefully, the conclusions drawn from their survey will come to fruition and 2014 will be a "solid" year.

CCCA Economic Dashboard: November 29th, 2013

December 2, 2013 16:14 by Clayton Reeves in Capital Markets, Economy, Financing  //  Tags: , , , , , ,   //   Comments (0)
Attached is the CCCA economic dashboard as of November 29th, 2013. Click here to view a larger image.

Pitchbook PE Deal Multiples Show Deal Multiples for Small Deals Falling

November 14, 2013 09:47 by Clayton Reeves in Capital Markets, Financing, M&A, Private Equity  //  Tags: , , , , , ,   //   Comments (0)
As reported by Pitchbook, PE transaction multiples were reasonably steady in Q3 2013. However, deal size showed significant changes. For example, median enterprise value (EV) for small deals (EBITDA<$25 million) fell from 5.0x in Q2 to 2.5x in Q3. On the flip side, EV/EBITDA multiples rose to 10.7x for transactions of $250 million or more, while revenue multiples fell to 1.7x, the lowest in over two years. So, what does this mean for the market? It means PE firms (and the market in general) continue to pay for profitability over pure sales. Market participants definitely want revenue growth, but they also want healthy margins and solid business models. Since companies with both are rare, PE firms continue to pay a premium on larger transactions. There is generally still no rush towards companies that show revenues, but lack profits, unless the growth story is compelling (i.e., Twitter).  Key statistics from 3Q 2013 explored in this report include: Median EBITDA multiple:6.81x Median debt percentage: 50% Average time to close a deal: 13 weeks Read the full report here.

CCCA Economic Dashboard: October 18th, 2013

October 22, 2013 10:20 by Clayton Reeves in Capital Markets, Economy, Financing  //  Tags: , , , ,   //   Comments (0)
Attached is the CCCA economic dashboard as of October 18th, 2013. Click here to view a larger image.

Increasing Seed Valuations Making Series A Rounds Difficult

October 18, 2013 08:55 by Clayton Reeves in Capital Markets, Economy, Financing, M&A, Private Equity, Venture Capital  //  Tags: ,   //   Comments (0)
As reported by Pitchbook, seed valuations have increased 62.5% from 2009 through the first three quarters of 2013 for a cumulative annual growth rate of 13.8%. Meanwhile, Series A valuations are increasing, but at a slower rate, from $6.8 million in 2009 to $8.9 million. This 30.8% growth represents an annualized rate of 10.3%. Inflated seed-stage valuations may be having an effect on a startup's ability to raise funding in the Series A round, as seed investors want to see appreciation in their investment, while Series A investors believe the seed valuation was too high. Source: Pitchbook As seed-stage investments increase, companies are finding it more difficult to raise Series A financing.  This is at least partly due to a shift in VC investment philosophy, which has seen the share of seed-stage investments grow as a proportion of total VC investments over the last three years.  VC firms are trying to pick out winners earlier, and get them for a reasonable price.  The competitive bidding, however, is causing those valuations to increase.  It will be interesting to see how this plays out over the next several years, and if the Series A crunch will continue. Read the entire article here.

A Busy Week in M&A!

As reported by Daily Finance, deal-makers have wrapped up three multi-billion dollar acquisitions so far this week as the markets get a late start thanks to Labor Day. This week has proven to be a busy one in terms of billion+ acquisitions, as three have been wrapped up already. Microsoft, Verizon and lesser known Jarden (consumer products) all completed deals with price tags over the billion dollar mark. Microsoft agreed to purchase Nokia's cellphone business for $7.2 billion in a move that has been anticipated by many. Controlling the business allows MSFT to make a more unified and coordinated challenge to Apple, Google and Samsung in the mobile market. This will allow the company to leverage their Windows platform, which has already gained more traction in mobile than many expected (although the desktop version has left much to be desired). Additionally relevant, and perhaps less obvious, is what impact the move will have on Microsoft's executive team moving forward. MSFT has "acquired" Nokia's CEO, Stephen Elop in the deal; Elop is a proven leader and will automatically be the top contender to succeed Steve Ballmer. Verizon's deal was more of a self purchase, as it completed the purchase of 45 percent of Verizon Wireless held by British Telecom giant Vodaphone. At a price of $130 billion, the cost was steep. However, this gives Verizon Communications full control of the company and its 100 million subscribers. Finally, in a deal that smells incredible, Jarden purchased privately held scent seller Yankee Candle, best known for its candles. That deal is valued at almost $1.8 billion. What does this mean for the wider market? It is difficult to tell. September is usually a bad month for stock markets, which could make M&A deal makers skittish. However, mega-deals of this nature are a good sign that activity in the second half may pick up as predicted. Read the entire article here.

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