Uncertainty about a wide range of geopolitical issues paralyzed dealmakers in June, lowering the volume of completed middle-market transactions to levels last seen in recession-ridden 2009. Participants in Mergers & Acquisitions’ monthly survey attributed the deepening M&A slump to concerns about the upcoming presidential election in the U.S., the vote by Britain to leave the European Union, the economic slowdown in China and terrorism around the world. Not all the news was bad, however, with the June survey results showing some areas of increased activity and predictions that the next 12 months will be healthier than the next three. (See related chart, 3-Month Forecast, 12-Month Forecast.)

The volume of completed middle-market transactions plummeted in June, with merely 85 deals closing in the month, down from 109 in May, and down from 171 in June 2015, according to data from Thomson Reuters. The volume of completed deals has been declining all year.  (See below for a list of selected deals that closed in June.) 

The results from our monthly survey were mixed. In positive developments, the composite score on the M&A Conditions Index (MACI) rose to 52.3 in June, up from the 48.7 reading in May. (See related chart, M&A Conditions Composite, June 2016). Divestitures resurfaced in June, which boosted the MACI reading. (See related chart, Month to Month Trends.) Large corporations, especially in the consumer goods sector, have been shedding slow-growing assets to focus on fast-growing brands

Also encouraging, credit loosened, according to survey participants. For the first time since September, the component that measures the availability of financing moved into expansion territory with a score of 51.9. Financing availability hit an historic low earlier in the year, when it dropped to 35.7 in February.

In negative developments, signed letters of intent remained in contraction, reinforcing the idea that there are still obstacles to closing deals, including pricing disparities between buyers and sellers.

Another negative note was sounded by the tech sector, an industry that often withstands downturns in overall M&A. The mid-June announcement by Microsoft Corp. (Nasdaq: MSFT) that it would buy professional social network LinkedIn Corp. (NYSE: LNKD) for $26.2 billion led analysts to predict a wave of large-cap Internet deals ahead.  But in the middle market, dealmakers gave tech a 3-month outlook score of 48.4 on the MMP, the lowest of all six sectors we measure on the index and the lowest score the technology, media and telecom (TMT) sector has ever received. Some poll respondents said that the influx of large, public corporations into non-traditional sectors may keep small companies out of the tech mix. Others attributed the dim outlook to too much money chasing too few deals in the tech world, where valuations have been high in recent years.

Overall, the middle market may see a return of activity later in 2016. Most sectors garnered higher scores for the 12-month outlook than the three-month outlook. (The exception was the consumer good and retail sector, in which dealmakers exhibited more faith in the short term.) Whichever party wins the presidential election in November, the conclusion of it is expected to bring a return of certainty to transactions, with most sectors expecting higher levels of dealmaking in the fourth quarter.

Editor’s Note on Methodology:

The MACI is a composite index of mergers and acquisitions activity in the U.S. It is the result of the Mergers & Acquisitions survey of approximately 250 executives in private equity firms, investment banks, lenders and advisor firms to track activity such as deals announced and deals completed, as well as acquisitions and divestitures. A reading of over 50 indicates an expansion relative to the prior month, and a reading below 50 indicates a contraction.

The MMP is a monthly sentiment indicator for the outlook of M&A activity and conditions. MMP results are presented as rolling aggregate indicators for both three- and 12-month outlook periods for macro M&A issues as well as for individual industry sector issues in healthcare, consumer/retail, manufacturing, energy, and technology/media/telecommunications on a monthly rolling basis. A diffusion index is produced by calculating the sum of percentages of those indicating on survey responses that describe a change in sentiment for three and 12 months (e.g., increase/positive, decrease/negative, or no change/neutral) to arrive at three-month and 12-month aggregate index values that are then averaged to create a total composite for the month. A reading of over 50 indicates an expansion relative to the prior month, and a reading below 50 indicates a contraction.

In addition to our monthly surveys, Mergers & Acquisitions uses data provided by Thomson Reuters about transactions that fulfill several requirements: Deals must have a value of roughly $1 billion or less; they must be completed (not just announced) within the timeframe designated; and they must include at least one U.S. company in the role of buyer and/or seller. Excluded from our completed deal charts are: recapitalizations; self-tenders; exchange offers; repurchases; stake purchases; and transactions with undisclosed values, buyers or sellers. Thomson Reuters updates its databases continuously. We use the data available at press time.

Key Middle-Market M&A Deals Completed in June 2016.

       
         
Date Acquirer Target Target Industry Value ($mil)
06/23/16 TransDigm Group Inc ILC Holdings Inc Electronic and Electrical Equipment 1,000.0
06/15/16 Mylan NV Renaissance Acq Hldg-Topical Drugs 1,000.0
06/20/16 Citibank NA Amer Express Co-Costco US Credit Institutions 980.0
06/06/16 Con Edison Transmission Inc Stagecoach Gas Services LLC Electric, Gas, and Water Distribution 975.0
06/02/16 Ningbo Joyson Electronic Corp Key Safety Systems Inc Transportation Equipment 920.0
06/15/16 Investor Group 1211 Avenue Of The Americas Real Estate; Mortgage Bankers and Brokers 913.0
06/17/16 Cision US Inc PR Newswire Association LLC Business Services 841.0
06/01/16 Veritas Capital Partners LP Verisk Analytics-Healthcare Business Services 820.0
06/10/16 Physicians Realty Trust Catholic Health-Portfolio(52) Real Estate; Mortgage Bankers and Brokers 724.9
06/14/16 F Marc de Lacharriere Fimalac 693 Fifth Ave,New ,New York Real Estate; Mortgage Bankers and Brokers 527.0
06/14/16 Synergy Resources Corp Noble Energy Inc-Cert Oil Oil and Gas; Petroleum Refining 505.0
06/23/16 Blackstone Group LP Vicinity Centres-Ret Asts Real Estate; Mortgage Bankers and Brokers 450.9
06/01/16 Brown-Forman Corp BenRiach Distillery Co Ltd Food and Kindred Products 415.4
06/01/16 FourPoint Energy LLC Chesapeake Energy-Oil & Gas Oil and Gas; Petroleum Refining 385.0
06/02/16 Praxair Inc Yara International ASA-Europea Chemicals and Allied Products 353.0
06/24/16 FormFactor Inc Cascade Microtech Inc Measuring, Medical, Photo Equipment; Clocks 348.4
06/02/16 Vantage Energy Appalachia II Pennsylvania Land Resources-Ce Oil and Gas; Petroleum Refining 339.5
06/09/16 Citi Private Bank 6 Bevis Marks Real Estate; Mortgage Bankers and Brokers 319.2
06/01/16 National General Holdings Corp Century-National Insurance Co Insurance 315.0
06/06/16 Corning Inc Alliance Fiber Optic Products Electronic and Electrical Equipment 297.2
06/01/16 Ally Financial Inc TradeKing Group Inc Investment & Commodity Firms,Dealers,Exchanges 275.0
06/03/16 United Bankshares Inc,WV Bk of Georgetown,Washington Commercial Banks, Bank Holding Companies 269.0
06/03/16 Vonage Holdings Corp Nexmo Inc Business Services 250.0
06/01/16 Handy & Harman Ltd SL Industries Inc Electronic and Electrical Equipment 225.4
06/20/16 Bankrate Inc NextAdvisor Inc Business Services 225.0
06/24/16 TowneBank,Portsmouth,Virginia Monarch Financial Holdings Inc Commercial Banks, Bank Holding Companies 220.2
06/20/16 Nassau Reinsurance Group Phoenix Cos Inc Investment & Commodity Firms,Dealers,Exchanges 217.5
06/10/16 Century Tokyo Leasing Corp CSI Leasing Inc Business Services 204.3
06/14/16 Westbrook Partners LLC Blackrock Workspace Ppty Tr Real Estate; Mortgage Bankers and Brokers 167.8
06/16/16 Investor Group Marubeni Rail Transport Inc Business Services 166.0
06/22/16 Schlumberger Ltd Xtreme Drilling & Coil-XSR Oil and Gas; Petroleum Refining 162.6
06/20/16 Dean Foods Co Friendly Ice Cream Corp-Retail Retail Trade-Food Stores 155.0
06/05/16 Investor Group Swansea City Football Club Amusement and Recreation Services 145.2
06/01/16 Noble Investment Group LLC Ashford Hospity Tr Inc-Select Hotels and Casinos 142.0
06/06/16 QTS Realty Trust Inc DuPont Fabros Tech Inc-NJ1 Real Estate; Mortgage Bankers and Brokers 125.0
06/02/16 Investor Group Overlook at Lakemont,Bel,Wa Real Estate; Mortgage Bankers and Brokers 118.0
06/07/16 Core-Mark Holding Co Inc Pine State Trading Co-Convenie Wholesale Trade-Nondurable Goods 112.0
06/15/16 BTG PLC Galil Medical Inc Measuring, Medical, Photo Equipment; Clocks 110.0
06/09/16 Byline Bank Ridgestone Bank Commercial Banks, Bank Holding Companies 105.0
06/23/16 Prosper Group Holdings Ltd Aloft Kuala Lumpur Sentral Hotels and Casinos 104.8
06/16/16 CatchMark Timber Trust Inc Forest Investment Assoc-Caroli Agriculture, Forestry, and Fishing 100.7
06/01/16 Westport Innovations Inc Fuel Systems Solutions Inc Transportation Equipment 95.9
06/17/16 BNC Bancorp,High Point,NC Southcoast Financial Corp,SC Commercial Banks, Bank Holding Companies 94.8
06/03/16 Federal Signal Corp Joe Johnson Equipment Inc Business Services 87.1
06/22/16 Sunoco LP Valentine Stores-Ret Con Bus Retail Trade-Food Stores 76.4
06/01/16 Diplomat Pharmacy Inc Valley Campus Pharmacy Inc Health Services 75.0
06/22/16 Columbia Sussex Corp Orlando Airport Marriott Hotels and Casinos 67.0
06/10/16 Al Rayyan Tourism Investment Viceroy Miami Hotel Hotels and Casinos 64.5
06/07/16 Investor Group Radius Bancorp Inc Savings and Loans, Mutual Savings Banks 63.0
06/02/16 National Health Investors Inc Continuing Care Retirement Health Services 56.3
06/22/16 Grupo Ferrer Internacional SA Alexza Pharmaceuticals Inc Drugs 52.4
06/23/16 Crius Energy Trust Crius Energy LLC Electric, Gas, and Water Distribution 45.4
06/15/16 Integrated Electrical Services Technibus Inc Electronic and Electrical Equipment 45.0
06/20/16 Walker & Dunlop Inc OMHHF-Mortgage Loan Portfolio Real Estate; Mortgage Bankers and Brokers 44.6
06/03/16 McFarland Cascade Holdings Inc 400 Investments LLC Investment & Commodity Firms,Dealers,Exchanges 42.5
06/06/16 Holly Energy Partners LP Cheyenne Plains Gas Electric, Gas, and Water Distribution 42.5
06/15/16 Customers Bancorp Inc Higher One Inc-One Account Credit Institutions 42.0
06/01/16 1717 Vine LLC Redbury Hollywood Hotels and Casinos 40.9
06/24/16 True N Mgmt Grp LLC 100 & 200 Regency Forest Bldgs Real Estate; Mortgage Bankers and Brokers 35.2
06/02/16 Shareholders Zedge Holdings Inc Prepackaged Software 33.6
06/06/16 IPT Acquisitions LLC AP Jamesburg Drive-Building Investment & Commodity Firms,Dealers,Exchanges 32.2
06/30/16 Digital Domain Holdings Ltd Digital Domain-Reliance LLC Motion Picture Production and Distribution 31.7
06/02/16 CareTrust REIT Inc Seniors Housing Social Services 30.8
06/27/16 WBI Energy Inc Dakota Prairie Refining LLC Oil and Gas; Petroleum Refining 28.5
06/22/16 PulteGroup Inc Hillcrest Golf & Country Club Amusement and Recreation Services 25.0
06/14/16 One Liberty Properties Inc Distn Facility,El Paso,Texas Construction Firms 23.7
06/30/16 Luminex Corp Nanosphere Inc Measuring, Medical, Photo Equipment; Clocks 23.0
06/20/16 Spectris PLC Capstone Technology Corp Prepackaged Software 22.5
06/01/16 Horizon Bancorp,IN Kosciusko Financial Inc Commercial Banks, Bank Holding Companies 22.5
06/10/16 Investor Group Stone Manor Corporate Center Real Estate; Mortgage Bankers and Brokers 19.8
06/01/16 Mediagrif Interactive Tech Inc Advanced Software Concepts Inc Prepackaged Software 18.5
06/01/16 UBM PLC Content Mktg Inst LLC Business Services 17.6
06/10/16 Mountain Capital Group Inc Peregrine Place Apartment Home Real Estate; Mortgage Bankers and Brokers 17.1
06/13/16 ContraVir Pharmaceuticals Inc Ciclofilin Pharmaceuticals Inc Drugs 17.0
06/01/16 Ferro Corp Pinturas Benicarlo SL Chemicals and Allied Products 16.7
06/13/16 Carolina Financial Corp Congaree Bancshares Inc Commercial Banks, Bank Holding Companies 16.3
06/24/16 Lilis Energy Inc Brushy Resources Inc Oil and Gas; Petroleum Refining 14.2
06/06/16 Country Pure Foods Inc Ridgefields Brand Corp Food and Kindred Products 14.1
06/20/16 Patrick Industries Inc Mishawaka Sheet Metal LLC Metal and Metal Products 14.0
06/17/16 Energy Fuels Inc Mestena Uranium LLC Mining 12.7
06/01/16 CAI International Inc Hybrid Logistics Inc Transportation and Shipping (except air) 12.0
06/29/16 Entellus Medical Inc CogENT Therapeutics-XeroGel Measuring, Medical, Photo Equipment; Clocks 11.0
         
Source: Thomson Reuters        

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