In the second edition of the Monthly Transaction Monitor report, we continue to analyze deal volumes within our 6 Practice Groups on a monthly basis, evaluate the impact of COVID-19 on business valuations, compare various public indices highlighting relevant sectors/segments, and more.
September 2020 Report Takeaways:
- Stability is Returning to the M&A Market
- Control sale volumes in June and July of 2020 appear to be leveling at approximately two-thirds of corresponding 2019 levels.
- Healthy, well-performing companies are enjoying more attention from buyers given a shortage of attractive targets on the market presently.
- Distressed Deal Activity May be Increasing
- Deal volumes in challenged sectors such as restaurants, retail (brick-and-mortar), and travel/leisure declined moreso than the broader market, down almost 66 percent in April versus the corresponding period from the previous year.
- Closing in these challenged sectors increased materially in July, as predicted by bankruptcy advisory professionals in our network.
- Valuation Multiples are Flat-to-Down Due to Pandemic
- Used as benchmarks for private company valuations, the performance of public company securities have been confusing the valuation picture lately.
- With the S&P 500 up over 8 percent this year, and up over 44 percent since a Covid-related low on March 23rd, some business owners and other advisors have been wondering if middle market valuations have actually gone even higher this year.
- A review of trends in the S&P 500 EBITDA multiple provides clues. While the EBITDA multiple is actually up almost 13 percent this year, removing the FAANG stocks from the index (Facebook, Apple, Amazon, Neflix and Google), which collectively account for over 15 percent of the S&P 500’s value, the index’s multiple is essentially flat.
- Based on our activities as well as the activities of our peers, we estimate a decline in the average EBITDA multiple of approximately 1x, but actual results are highly situation dependent.
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