Dealmakers polled in February reported a significant increase in activity from the previous month, based on the Mid-Market M&A Conditions Index (MACI), a barometer created by Mergers & Acquisitions and published in partnership with PwC.
The MACI is a diffusion index. Readings above 50 indicate an expansion in M&A activity and readings below 50 indicate a contraction. A reading of 50 indicates there was no change month-to-month. The further from 50 a reading is, the stronger the indicated change.
The composite index is a weighted average of readings on a range of indicators based on responses to survey questions about topics that include the number of companies a firm has put up for sale, number of deals completed, ease of obtaining financing, number of bidders, and actionable leads.
Respondents are also asked about staffing levels. Great care is taken to guarantee that the breakdown of responses are in line with the industry at large. Values for each component of the index are equal to the percentage of responses indicating increased activity, plus half of those indicating “no change.” Weighted component scores are then averaged to arrive at the composite score. When calculating the composite, contrary indicators are scored inversely the component score is subtracted from 100.
The February MACI yielded a composite score of 57.9, reflecting a healthy increase in early-stage dealmaking activity. Factors that had the largest impact included Leads, with a reading of 73.6, and Signed Letters (of Engagement and Intent), with a reading of 65.3. These indicators are in keeping with the optimism dealmakers have expressed about 2014 in many of our recent surveys and interviwes.
The only component of the MACI that showed a slowdown for this period was completed deals, which came in at 47.9. But the beginning of a year is typically a slower period for closed deals, following the traditional end-of-the-year scramble to wrap up transactions.