Dealmakers have been predicting that 2014 would be a great year for M&A, and, so far, they’re right. The first nine months of the year yielded 1,721 completed middle-market transactions, the second-highest deal volume for the January-through-September period in five years. Total deal value was $230.3 billion, the highest for the period in five years. (See related graphic.)
“Everyone believes there are real feet to the economy now,” Dinan & Co. founder Mike Dinan told Mergers & Acquisitions assistant managing editor Anthony Noto in a video interview shot at the ACG Los Angeles 2014 Business Conference. “There’s buy-in that the economy is on the mend. There’s plenty of cash on balance sheets. Now is the time to deploy that cash, and M&A is one of the likely areas.” (View the whole interview at www.themiddlemarket.com/video.)
In one of the more notable transactions of the third quarter, Hormel Foods Corp. (NYSE: HRL) closed the $450 million acquisition of CytoSport Inc., maker of protein drink Muscle Milk, in August. The deal came amid great interest on the part of strategic buyers, private equity firms and consumers in vitamins, minerals and supplements, as reporter Allison Collins wrote about in our September cover story. We’re not surprised that Hormel is leveraging the trend. The maker of Spam has become an adept strategic acquirer. Mergers & Acquisitions honored Hormel with our 2013 M&A Mid-Market Award for Deal of the Year for the $700 million purchase of the popular Skippy peanut butter brand from Unilever plc (NYSE: UL).
The retail industry also produced significant transactions in August. Footwear group Steve Madden (Nasdaq: SHOO) closed the purchase of Dolce Vita Holdings Inc. for $60.3 million, just one example of the consolidating shoe business in 2014.
The tech sector delivered September’s largest middle-market deal, as competition heated up for Twitch Interactive Inc., an online community of video gamers. Amazon.com Inc. (Nasdaq: AMZN) took home the prize for $970 million, marking the Internet company’s biggest acquisition ever.
Nonetheless, September proved to be the slowest month of the quarter for deal volume. The month produced 156 completed deals, compared with 202 in August and 231 in July. Some of the slackening was due to seasonal distractions, including dealmakers taking vacations in late August and sending kids back to school in September.
The fourth quarter will provide the ultimate proof of whether or not the optimism about 2014 was justified. In 2013, October and December each delivered 260 deals, making them the year’s most fruitful months for middle-market M&A.