Market Commentary

Q3 2018
There is no question that the M&A market is white hot. Amidst the longest period of economic expansion in US history, the M&A market has been bolstered by cash-rich companies, cheap and easy access to acquisition financing, significant amounts of private equity (PE) dry powder, and strong optimism in the US economy. The National Federation of Independent Business (NFIB) watched the Small Business Optimism Index rise to 107.9 in July—the second-highest level in history, falling within 0.1 point of the July 1983 all-time high.
Q2 2018
It sure feels like behind-the-scenes transaction activity is at very high levels!  We expect to see a jump in deal announcements in the months ahead.  While Q1 volumes were a bit down, we see that as a brief lull in an otherwise active market.  Multiples and leverage levels remain at historically robust levels.  The expected surge in activity is driven by improved performance fundamentals at companies of all sizes.
Q1 2018
Stable and Strong:  Quality Premiums Abound Despite what feels like a volatile start to the year in public equity markets, middle market valuations remain quite firm following another very strong year in 2017.  Deal volume has tapered off a bit as the bull market in M&A matures.  However, demand remains robust, especially from PE buyers.  The average multiple paid by PEGs climbed 17.4% year-over-year, from 6.9x to 8.1x.   
Q4 2017
Seller’s market leaves buyers fighting for the prize. The ripe economic environment in 2017 has created a vibrant seller’s market with companies achieving premium EBITDA multiples of approximately 9.1x.  Although Q3 YTD deal volume dropped 16.2% year-over-year, it is Capstone’s view that the decline is attributable to fewer companies available for sale rather than a lack of buyer demand.
Q3 2017
Private equity (PE) groups have amassed a fortune in dry powder, cash reserves meant to purchase assets in the future, and have buoyed the market despite slowing deal volume.  According to Pitchbook, PE groups currently have $545.5 billion in dry powder and have increasingly used it to make acquisitions.  PE deal volume is 17% higher than it was this time last year and is on pace to reach the record levels of 2015 and 2014.  The positive effect of PE activity has helped to boost valuations to reach an average of 9.4x EBITDA, even as overall middle market deal volume decreased
Q2 2017
While there was a slight pull back in deal volume, middle market deal activity remained healthy in Q1 2017; a trend that is expected to remain over the next twelve months. Surrounded by a bullish stock market, rising levels of consumer confidence and global uncertainty, the US has been a safe haven for the acquirers of businesses. News From the Middle Podcast Ted Polk, a Capstone Managing Director, discusses the middle market M&A environment.
Q1 2017
Global economic uncertainty leading up to the US election and fallout from Brexit had a dampening effect on deal volume with the number of transactions completed in 2016 declining 6.2% compared to the near record level of activity achieved in 2015.
Q4 2016
Year-to-date (YTD) through Q3 2016, we have seen a 16% decline in deal volume, largely driven by an unexpectedly quiet Q1.  The always entertaining Presidential Election contributed to interim market volatility and mixed economic sentiment.  The dynamic of an expected Clinton victory fueled a year
Q3 2016
Despite uncertainty in global markets, middle market M&A valuations in the US have remained strong through Q3 2016.  Trump vs. Hillary, Brexit, interest rates, oil prices and Turkey’s failed coup are all forces that have threatened and, more importantly, failed to destabilize markets.  Instead, domestic M&A activity has remained healthy, highlighted by increased EBITDA multiples across industries and transaction sizes, strong average deal valuations, renewed interest by foreign acquirers and continued interest from private equity (PE) and corporate acquirers.
Q2 2016
Microsoft (NASDAQGS:MSFT) acquires LinkedIn (NYSE:LNKD) for $27.6B.

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