State of the M&A Market: Private Equity’s Compounding Influence

Private Equity (PE) has a strong influence on the M&A market that goes beyond the initial platform transaction (PE Platform Transactions). PE Platform Transactions have steadily represented a low percentage of the total transaction volume over the past few years. Since the beginning of 2007, PE Platform Transactions have stayed within a band of 8% to 10% of total transaction volume on a quarterly basis. This data would lead one to believe that PE’s influence on the M&A market is minimal. However, a deeper analysis shows that PE portfolio companies represent a meaningful percentage of strategic acquisitions (PE Backed Transactions).

PE Backed Transactions can be easily overlooked as reporting agencies label these deals as strategic transactions, since the acquirer is a company and not a PE firm. Nonetheless, we all know that PE firms play a noteworthy role in these acquisitions. Generally, PE firms help source the acquisition opportunity, assist with the analysis, and are a major determinate in proceeding forward with an opportunity. More importantly, PE firms will often provide funding, equity and/or debt, for the acquisition.

In the first quarter of 2014, PE Backed Transactions represented 38% of all strategic transactions. PE Backed Transactions have averaged 36% of strategic transactions per quarter since 2007. The combined total of PE Platform Transactions and PE Backed Transactions represented 42% of total transaction in the first quarter of 2014. This is in line with the seven year average of 41% from 2007 to 1Q 2014. The table below provides an overview of PE Backed Transactions for the past seven years.

Market Activity

M&A activity decreased 3% in the first quarter of 2014 compared to the fourth quarter of 2013. Transaction volume in the first quarter of 2014 was 2,287, which is lower than each of the previous two quarters.

On a rolling 12-month basis through the first quarter of 2014, total transaction volume was approximately 9,100 deals, compared to the year prior which was more than 10,100. From a value perspective, of the deals that disclosed transaction values (~ 24% of strategic buyers and ~ 23% of PE buyers), the market observed an increase in dollar volume. Total transactions value increased from $746 billion to $821 billion on a rolling 12-month basis through first quarter of 2014 over the first quarter of 2013. The increase in total transaction value was primarily driven by strategic transactions. On a rolling 12-month basis, strategic value was $731 billion through first quarter of 2014, compared to $679 billion for the same timeframe through the first quarter of 2013.


There are some signs that the reduced level of M&A activity in the first quarter may soon turn around. We have experienced an increasing deal pipeline and have received confirmation from buyers that more opportunities are coming to market. The continued improvement of economy, although modest, coupled with stable stock and debt markets will support deal activity. Buyers may look to enhance their recent growth trends through acquisitions to keep the upward momentum. Buyers will continue to drive the market as there still remains high levels of excess cash on corporate balance sheets and PE capital overhang. Also, the lending market remains favorable due to the historically low interest rates.

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Michael Poole

Investment Banking
Orlando Office

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