2013 PE Deal Flow Review

February 13, 2014 11:32 by Clayton Reeves in   //  Tags: , , , , , , ,   //   Comments (0)

McGladrey recently released reports on PE activity in four sectors: business products & services, healthcare, information technology and consumer products.

Business Products & Services: The first half of 2013 represented one of the worst periods of the last several years for B2B deal making. The first two quarters suffered a hangover effect from the rush to close deals at the end of 2012, and took the first six months of 2013 to recover. While Q3 and Q4 were better, they couldn't make up for the lack of performance over the first half of the year. This is surprising, as 2012 had the most PE exits in B2B in the last ten years. Many expected those exits to spur additional investments, but instead PE mostly sat on their cash. 2014 is expected to be better.

Healthcare: Once a rock in an uncertain sea of M&A, not even healthcare could escape unscathed from 2013. Deal flow in the healthcare industry contracted for the first time in 2013 since 2009. Although the number of deals consummated was still historically high at 280, capital invested declined for the second straight year. Industry experts blame a variety of factors on the hesitation to invest in healthcare, foremost amongst those reasons being the affordable care act. Once there is more certainty around the evolving regulations, investors are expected to have more confidence in evaluating acquisitions.

Information Technology: PE deal makers broke a streak of three straight years of increased deal making in IT, but capital invested soared 55% to $86.5 billion. IT companies continue to perform well as technology continues to make its presence known in professional and personal applications. McGladrey expects 2014 to be slightly better.

Consumer Products: M&A in the B2C industry followed general industry trends, declining 14 percent from 2012 to 2013. Capital invested was the highest it has been since 2008, but consumer products companies continue to struggle as confidence continues to improve gradually. Q4 was difficult for consumer products companies, as holiday sales increased revenues at the expense of margins. McGladrey believes the pipeline is stocked with deals compared to the same time last year, since Q4 2013 did not see the same rush to close as Q4 2012 did.

Access the full reports here.

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