January proved the strongest month of 2015 for completed middle-market deal volume, according to data provided by Thomson Reuters. But the news got worse as time went on. By the time Mergers & Acquisitions published our mid-year wrap up, we were already suggesting that 2015 was front-loaded. By year’s end, the 2015 tally of completed deals fell 200 transactions short of the previous year, a decline of 8 percent. The fourth quarter showed a dramatic dip, with 167 fewer deals closed than the same period a year earlier, representing a 26 percent drop. (See Month-by-Month Look at 5 Years of Mid-Market M&A by Volume).
What was happening in the middle market may have been somewhat obscured by the attention paid in the mainstream business press to the announcements of mega deals, accompanied by headlines proclaiming the year a banner one for M&A. But not only were those deals way above the $1 billion threshold of the middle market, they were also only announced deals, not completed ones. Whether or not they pass regulatory muster and other obstacles and actually close remain open questions. Inflated valuations, the likes of which had not been seen since pre-recession 2007, permeated the landscape. The high prices kept many dealmakers away, especially private equity firms that could afford to wait for prices to come down.