Guest Article: Merged & Acquired Company Transaction Survey Data
AM&AA was formed in 1998 to bring together professionals with experience in the middle market corporate financial advisors arena. In 2008, the association began conducting a survey of its members, collecting data on transactions in which they were involved. The anonymous web-based survey is conducted twice annually to gather data on transactions involving members of AM&AA for the preceding six months. The most recent Deal Stats Transaction Survey was released in August, covering the last half of 2011.
Data is collected from both advisors and brokers. For purposes of the survey, M&A advisors are individuals compensated with fees for service, whereas M&A brokers receive most of their compensation as success fees for completed transactions. Total transactions reported by members vary from period to period as the deal environment changes. The table below shows the total number of transactions reported annually by AM&AA members during the last two years, as well as average transaction size.
| | 2010 | 2011 |
| Transactions Reported | 191 | 256 |
| Avg. Trans. Size ($millions) | 22.0 | 23.2 |
The top industries represented may help in deciding whether to consider using this data for your subject company. Industries with the largest transaction volume based on number of deals done in the second half of 2011 were (dollar volume rankings were similar):
1) Manufacturing
2) Health Care and Social Assistance
3) Wholesale Trade
4) Professional, Scientific and Technical Services
5) Finance and Insurance
While the order of the industries tends to vary from survey to survey, overall, the top five industries tend to remain the same.
The data most BV appraisers spend the majority of their time searching for and compiling are multiples. The AM&AA survey provides EBITDA multiples for all transactions, as well as EBITDA multiples by industry and EBITDA multiples based on various size metrics. Note that not all reported transactions provide EBITDA multiples or industry classifications.
The chart below presents the average EBITDA multiples reported beginning near the official end of the recession and continuing through 2011. The 12 month survey period from July 2008 through June 2009 captured market conditions during the depths of the recent recession, a period when the average EBITDA multiple was only 4.69. Average EBITDA multiples have since recovered and averaged 5.77 in the second half of 2011 as shown in the graph below.
Certain factors can impact the magnitude of EBITDA multiples including 1) transaction size, 2) target company EBITDA, and 3) target company revenue. These factors are examined in the Deal Stats Transaction Survey. Charts below illustrate these relationships, and compare EBITDA multiples in the second half of 2011 with multiples in the prior periods.
Traditionally, a positive relationship between transaction size (total consideration, defined as purchase price paid plus assumed liabilities) and EBITDA multiples. The Deal Stats Survey also investigated the relationships of EBITDA multiples to company revenue and EBITDA. EBITDA multiples to company revenues and company EBITDA have historically exhibited a positive relationship, although not as strong as the relationship between EBITDA multiples and total consideration.
In general, transactions for companies with EBITDA less than $250,000 and $250,000 to $500,000 tended to have relatively high multiples. Members supplying the data provided some reasoning as to why multiples were high. Frequently, transactions for smaller companies tended to have synergistic benefits to the acquirer. In addition, some members reported high multiples due to the target being a turnaround candidate.
AM&AA is currently collecting data on deals completed in the first half of 2012 and the results will be reported on the AM&AA website after the survey closes.
Jason Bolt, AM, CFA
Columbia Financial Advisors, Inc.
From the Editor:
As discussed above, the data is collected via confidential survey of the association’s members, so access to the underlying data is not available. By the way data is collected in the survey, the impact of extreme outliers on reported averages is mitigated.
If any members have run across interesting or useful data sources that they would like to share with other members, just let me know. Hope to see many of you at the upcoming Advanced Business Valuation Conference in Phoenix!
Arlene Ashcraft, ASA, CFA
Columbia Financial Advisors, Inc.