Matt Roberson, Principal with SC&H Capital, Discusses M&A Trends 2014
January 28, 2014
A large portion of the below text was transcribed from the podcast
M&A Trends 2014: Upswing in M&A Transactions Forecasted
From sequestration to the Affordable Care Act, we saw a number of key variables that impacted overall M&A activity in 2013. As a result, the volume of deals was down about 10 percent across many industries – although some sectors did well.
M&A Trends for 2014 forecast a major upswing in M&A activity, buyers are starved after a 2013 that was rather stale for mergers and acquisitions.
M&A trends for 2014 are starting out with a monster merger of Comcast and Time Warner Cable. This mega merger means the new conglomerate will provide one third of american homes with television and internet connections, unless of course the FCC steps in.
Matt Roberson, projects an upswing of M&A deals overall, but not consistently on the scale of the Comcast and Time Warner deal. Expect to see a high volume of middle market m&a deals throughout the year.
Historically low interest rates, healthy stock performance, and famished buyers forecast M&A Trends for 2014 will be active. Expect to see continued strength, in particular, in the technology and healthcare sectors. We also foresee a bounce back in M&A for federal contracting after a slow 2013.
M&A Trends 2014: Technology Sector
M&A technology trends will continue to see a strong environment in a number of sub sectors. In particular:
- Cloud Services
- Software as a Service (SaaS)
- Cyber Security
- Data Analytics
One of the more notable deals we saw in 2013 was Cisco’s acquisition of Sourcefire which came in at an amazing multiple of over ten times revenue. This just goes to show you how much a large buyer is willing to pay for a cyber security company in the technology space.
There are a number of strategic buyers in the technology sector out there right now who are doing a high volume of middle market m&a deals. Just not like blockbuster deals like Cisco’s acquisition of Sourcefire last year.
Yahoo is a perfect example of a strategic buyer acquiring a number of companies. Last year Yahoo did nine deals in one quarter, all of which were under one hundred million dollars. Their only real “blockbuster” deal was the acquisition of blogging platform Tumblr.
Theres a real focus on unique capabilities and distinguishing characteristics thats driving M&A Trends for 2014 in the technology space.
Healthcare M&A 2014
We can expect to see a number of healthcare M&A deals in both the provider side (hospitals) as well as healthcare information technology space. Government regulations and advances in technology are pushing health care towards exclusively electronic record keeping. While most major healthcare institutions have already adopted this initiative, smaller ones are starting follow suit.
Healthcare IT M&A
Security, data analytics and payment services will be huge for M&A activity in 2014. A lot of this has been driven by the Affordable Care Act which has been, and will continue to drive high deal volume.
Turn Around in Federal Government Contracting
If you look overall, at M&A Trends for 2013 one of the spaces that was really struggling was the federal government contracting space. It was down sharply from 2012 and a lot of that was caused by political uncertainty with the government shutdown and sequestration. There were few quality deals, sellers were waiting it out and buyers were watching and waiting.
We finally have visibility into the federal budget and contracts are starting to be awarded once again. The M&A environment is conducive to more M&A activity because the buyers were fasting last year and they’re a bit starved for good deals.
Looking for M&A Opportunities? Want to Sell?
If you want to get the wheels in motion you must assess whether or not your goals can be met by an M&A event. That generally requires focusing in on two things:
- Internal Factors (company specific)
Is my company financially healthy? Are my products or services unique? Are my products or services in demand?
- External Factors (global factors)
Are Buyers available? Is the general economy in good health? Are comparable companies being valued highly? Is capital available?
You really need to asses both internal and external factors to decide whether or not the time is right. We’ve introduced some basic concepts to you but there are number of other factors to considers which is where our services come in.
Our best advice is to speak with an expert. Business owners are too close to the company to make a fair assessment of its condition.
SC&H M&A services
SC&H is a top middle market investment bank. We deal with clients ranging from ten million in enterprise value up to a couple hundred million dollars in enterprise value. We focus largely on a couple of different industries like technology, healthcare, and government services. We do sales side M&A consulting as well as buy side M&A consulting, capital raising, estate planning, and management decisions.