10 Year Middle-Market M&A Analysis

Strategic Buyers with Cash are Most Active

by Terry Stidham

 

Houlihan Lokey released their Deal Analysis covering a select group of public and private middle-market transactions across various industries with purchase prices ranging from $10 million to over $1 billion for which they served as a financial adviser during the past 10 years.

Their findings included the following:

• 61% of the transactions were strategic buyers
• The majority of the transactions were stock purchases with cash
• The average enterprise value/EBITDA multiple over the past 10 years was 8.2x with a high of 9.9x in 2006
• The average enterprise value/revenue multiple was 1.4x with an high in 2006 of 2.0x
• Deals with purchase prices over $100 million had higher trading multiples
• Earn-outs were used in 16% of transactions during the past 5 years
• The median amount of the earn-outs, as a percentage of the purchase price, was 10% over the past 5 years
• The average survival period for representations, warranties and indemnification escrows was 19 months
• The average escrow size was 7.8% of the transaction price with an high of 26.7% 

This information may be useful to acquirers and targets who are trying to determine if their proposed deal terms fall within the realm of historical "market" terms. 


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About Terry Stidham, President and Founder of Target Search Group (TSG). TSG is a business development firm providing mid-market deal flow and investment opportunities for a select number of private equity and corporate clients. TSG sources and originates investment opportunities that fit their client's strategy, size and focus on a generalist, opportunistic, and a specific search basis.

Terry is a Business Development Leader with extensive knowledge of the M&A process, combined with an in-depth understanding of the constantly changing global capital markets environment. He has served as the head of entrepreneurial organizations as well as Fortune 500 companies. He specializes with mid-market companies in a diverse array of industry sectors from service and manufacturing to technical and professional firms.

Mr. Stidham speaks the language of both the seller and the buyer having vast experience on both sides of the transaction. He has been directly involved in the execution and successful closing of hundreds of investment banking and corporate finance transactions. Mr. Stidham has instructed thousands of business owners on how to prepare for a successful exit. He improves operational efficiencies leading to significant increased value.