Philadelphia regional M&A updateQ3 2019

Philadelphia regional M&A update: Q3 2019

1

M&A activity

There were 174 transactions that closed in the Philadelphia regional market during the third quarter of 2019 (Q3 2019), an increase of approximately 19.2 percent from the 146 closed transactions in the prior quarter. The 174 closed transactions mark an increase from the 133 closed transactions during the same period in 2018. Additionally, aggregate reported transaction value increased approximately 22.8 percent from Q3 2018.

In Q3 2019, North America’s overall M&A activity remained robust, totaling over $600 billion. So far, as of Q3 2019, more than 8,000 deals have closed with an aggregate transaction value of roughly $1.6 trillion. In Q3 2019, eight megadeals closed with valuations greater than $10 billion, accounting for more than one-third of total deal value. Median deal size in North America rose to $93.5 million through Q3 2019, a dramatic increase from $57.0 million in 2018. One factor that has influenced markets in Q3 2019 is the tense relationship and trade war between the U.S. and China. Aside from the day-to-day volatility of international relations, the M&A market has been one of the areas hit hardest by the trade war. Deal value for North American target companies with a Chinese acquirer are on pace to fall by more than 90% since the peak in 2016.

With the increased prominence of startups and companies staying private for longer periods, high-growth companies have contributed to lofty valuations. The median valuation / EBITDA multiple for M&A transactions rose slightly to 10.4x through Q3 2019, up from 9.4x in 2018.

Source: S&P Capital IQ, PitchBook, and Baker Tilly Capital research (October 2019)

14.9%

28.7%

13.8%

24.1%

7.5%

10.9% Info. Tech.

Consumer

Healthcare

Industrials

Financials

Other

M&A activity by industry

The consumer sector led the Philadelphia region’s M&A activity with 28.7 percent of the total deals closed in Q3 2019. Industrials represented 24.1 percent and information technology and healthcare each represented 14.9 and 13.8 percent, respectively, while financials followed with 7.5 percent. Other accounted for the remainder of the transactions representing 10.9 percent. Compared to the previous quarter, industry activity has changed. The consumer sector led the Philadelphia region’s M&A activity with 27.4 percent of the total deals closed in Q2 2019. Information technology represented 20.5 percent, while industrials and healthcare followed, with 19.9 percent, and 17.1 percent, respectively. Financials and other accounted for the remainder of the transactions representing 6.8 percent and 8.2 percent, respectively.

$82.1

$15.3

$144.1

$47.8

$32.2 $34.0 $29.7

$90.4

$22.9$16.1

$10.4 $10.9

$58.1

$14.6$3.3

$13.4

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Quarterly Philadelphia Region M&A activity for transactions closed Aggregate transaction value and number of deals

Philadelphia regional M&A update: Q3 2019

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Philadelphia regional middle market M&A activity

There were 15 middle market transactions with reported values that closed during Q3 2019, up from 11 during Q2 2019. Q3 2019 also marked an increase of 50.0 percent from 10 middle market deals with reported values for the same period in 2018. The median transaction size of $55.0 million of the 15 middle market deals with reported values that closed in Q3 2019 was a $12.3 million increase from the median transaction size of the 11 middle market deals with reported values that closed in Q2 2019.

Philadelphia regional middle market M&A activity

Median transaction size

Middle market is defined as transaction values between $10 million and $200 million Source: S&P Capital IQ and Baker Tilly Capital research (October 2019)

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Philadelphia regional M&A update: Q3 2019

3

Buyers and targets by location

As presented below, the largest number of buyers and targets were located in the Philadelphia, Southeast Pennsylvania, South Jersey and Trenton areas during Q3 2019.

Buyer by location Target by location

First three numbers of ZIP codes included in each region, as categorized by S&P Capital IQ: Harrisburg: 170, 171, 172, 178; Lancaster: 173, 174, 175, 176; Lehigh Valley: 180, 181, 183; Philadelphia: 190, 191, 192; Reading: 179, 195, 196; Southeast Pennsylvania: 189, 193, 194; South Jersey: 078, 079, 080, 081, 082, 083, 084; Trenton: 085, 086, 087

Notable Q3 2019 closed transactions

Source: S&P Capital IQ and Baker Tilly Capital research (October 2019)

0 5 10 15 20 25 30 35

Trenton Area

South Jersey Area

SE Pennsylvania Area

Reading Area

Philadelphia Area

Lehigh Valley Area

Lancaster Area

Harrisburg Area

Delaware

0 5 10 15 20 25

Trenton Area

South Jersey Area

SE Pennsylvania Area

Reading Area

Philadelphia Area

Lehigh Valley Area

Lancaster Area

Harrisburg Area

Delaware

08/21/2019 UGI Corporation (NYSE:UGI) AmeriGas Partners, L.P. Amerigas Propane, Inc. $ 5,308.2 Strategic Energy

08/22/2019 Roper Technologies, Inc. (NYSE:ROP)

iPipeline Thoma Bravo, LLC; Deepbridge Capital LLP

1,625.0 Strategic Info. Tech.

08/01/2019 Quaker Chemical Corporation (NYSE:KWR)

Houghton International Inc. Gulf Houghton Lubricants Ltd. 1,413.7 Strategic Materials

08/01/2019 UGI Energy Services, LLC Columbia Midstream Group, LLC Columbia Midstream & Minerals Group, LLC

1,187.0 Strategic Industrials

07/01/2019 E&C FinFan, Inc. Industrial Air-X-Changers Business Of Harsco Corporation

Harsco Corporation (NYSE:HSC)

592.0 Strategic Industrials

07/24/2019 JPMorgan Chase Bank, National Association

InstaMed Communications, LLC N/A 500.0 Strategic Healthcare

09/23/2019 The Hershey Company (NYSE:HSY)

ONE Brands, LLC CAVU Venture Partners 397.0 Strategic Consumer

09/19/2019 Eurazeo SE (ENXTPA:RF) Elemica, Inc. Thoma Bravo, LLC 390.0 Financial Consumer

09/30/2019 Knauf International Gmbh Armstrong World Industries, Inc., Business in Europe, the Middle East and Africa and the Pacific Rim

Armstrong World Industries, Inc. (NYSE:AWI)

330.0 Strategic Industrials

09/23/2019 Ferrero S.p.A. Kelsen Group A/S Campbell Soup Company (NYSE:CPB)

300.0 Strategic Consumer

Buyer Type

Value ($MM)

ClosedDate Buyers/Investors Target Target

SectorSeller