Description of BRG Quarterly M&A Report Contents Global Industry Trends………………………………………………………………………… 2 Global and Domestic Pricing Trends……………………………………………………………3 Deal Volume by Market Capitalization and Industry…………………………………………4 Trends in Insurance M&A and Financial Distress……………………………………………5 Fariness Opinion vs Fair Market Valuation for Private Funds…………………………..... 6 About BRG…………………………………………………………………………………………7 General Market Trends Global M&A Activity by Number of Transactions (QoQ) Q1 2024 QoQ YoY Volume Growth Growth Africa 88 -12.0% -12.0% Asia 1,053 -7.3% -10.2% Australia and New Zealand 236 -11.9% -12.3% Europe (incl. Russia, excl. U.K.) 1,796 -0.4% -22.8% Latin America 164 -16.8% -37.9% Middle East 95 10.5% -19.5% North America (excl. U.S.) 450 10.6% -15.6% Low (%) High (%) United Kingdom 738 5.4% -15.6% Source: S&P Global Market Intelligence as of 4/8/2024. United States 3,013 -3.6% -16.7% This report provides geographic data, industry data, and our proprietary view on global activity in the Mergers & Acquisitions ("M&A") space. The purpose of this report is to analyze trends in geographical regions and industries, both globally and in the U.S., and to provide insight into changes in pricing as a result of those trends. We further strive to provide up-todate information on attractive markets to help navigate our clients' M&A efforts. The primary source for the data contained in this report is S&P Global Market Intelligence. BRG does not take any responsibility for the data presented and bases its conclusions solely on the information obtained. This material is intended merely to highlight market developments and is not intended to be comprehensive and does not constitute investment, legal or tax advice. Geographical Trends While the last quarter of 2023 saw an uptick in M&A activity, Q1 2024 did not exhibit the same trend due to higher-than-expected inflation data, prompting the Federal Reserve to keep interest rates at their high levels. Despite the slowdown, deal volume has shown a positive trajectory since mid-2023 and could be poised for a strong rebound if inflation and interest rates return to a normalized level. Following a strong fourth quarter in 2023, Q1 2024 saw overall transaction volume decrease 2.5% QoQ globally. Latin America saw the highest decline in transaction volume with a decrease of 16.8% QoQ while North America (excluding the US) exhibited the highest quarterly growth of 10.6%. Deal volume in the U.S. decreased 3.6% QoQ led by a 22.1% contraction in the Materials industry. Q1 2024 Prepared By: Chau Hoang, CFA, ASA Managing Director [email protected] 212.782.1423 Karthik Bhavaraju Director [email protected] 917.684.2087 Contributor: BRG Quarterly M&A Report Wick Smith Managing Director [email protected] 678.224.5367 BRG Q1 2020 BRG Global Industry Trends Q1 2024 2 Number of Transactions - Key Industries (Global) Total Deal Value by Industry (Global) Commentary (1) Total is inclusive of Real Estate industry transactions and transactions uncategorized by S&P Global Market Intelligence. Source: S&P Global Market Intelligence as of 4/8/2024. Transaction information based on publicly available data as of Q1 2024 end as obtained from S&P Global Market Intelligence and analyzed by BRG. In Q1 2024, deal activity remained suppressed. Overall, M&A volume declined 2.5%. Seven industries exhibited declines while only one industry grew moderately QoQ. The Financials industry exhibited the largest declines of 14.4% on a volume basis. Concurrently, TMT experienced volume growth of 0.9% QoQ as AI and other industry trends continue to drive interest in the sector. Q1 2024 total global deal value decreased 34.7% QoQ, from $666.9 billion in Q4 2023 to $435.4 billion in Q1 2024. In addition, the average value per transaction (''AVPT'') decreased 33.1%, from $85.2 million in the prior quarter to $57.0 million. Contrary to QoQ volume trends, the Financials sector witnessed the highest growth in total deal value (+49.5%) in Q1 with AVPT increasing 74.6%, while TMT exhibited the largest decrease with total deal value declining 76.0% and AVPT falling 76.2%. The Financials sector was buoyed by two mega-deals including GTCR's $12.7 billion acquisition of a majority stake in Worldpay, a global provider of payment solutions, and RBC's $11.5 billion acquisition of HSBC's Canadian arm. Meanwhile, the TMT sector experienced a return to normalcy following last quarter's mega-cap acquisitions of VMware and Activision Blizzard. 77.4 26.5 119.6 40.3 60.2 72.3 39.1 64.5 72.9 44.7 35.7 49.6 22.7 42.8 36.7 78.6 49.7 61.0 125.3 60.6 35.1 12.6 37.2 17.0 31.8 73.2 43.6 67.8 53.1 73.9 47.4 35.3 68.2 46.6 41.2 66.2 65.1 51.0 241.3 57.9 68.3 45.9 19.3 27.8 28.3 - 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Deal Value (USD in billions) Financials Energy and Utilities Materials Healthcare Real Estate Industrials Consumer TMT Other 750 552 637 723 619 400 500 600 700 800 900 1,000 Q1 '23 Q2 '23 Q3 '23 Q4 '23 Q1 '24 273 234 245 317 300 150 200 250 300 350 400 450 Q1 '23 Q2 '23 Q3 '23 Q4 '23 Q1 '24 614 513 470 549 493 400 450 500 550 600 650 700 Q1 '23 Q2 '23 Q3 '23 Q4 '23 Q1 '24 593 489 521 529 485 300 400 500 600 700 800 Q1 '23 Q2 '23 Q3 '23 Q4 '23 Q1 '24 1,822 1,468 1,343 1,501 1,474 1,000 1,200 1,400 1,600 1,800 2,000 2,200 Q1 '23 Q2 '23 Q3 '23 Q4 '23 Q1 '24 1,145 1,062 948 1,069 1,002 900 950 1,000 1,050 1,100 1,150 1,200 Q1 '23 Q2 '23 Q3 '23 Q4 '23 Q1 '24 1,828 1,414 1,413 1,379 1,392 1,300 1,400 1,500 1,600 1,700 1,800 1,900 2,000 Q1 '23 Q2 '23 Q3 '23 Q4 '23 Q1 '24 9,275 7,370 7,010 7,825 7,633 6,000 7,000 8,000 9,000 10,000 Q1 '23 Q2 '23 Q3 '23 Q4 '23 Q1 '24 Financials Energy and Utilities Materials Healthcare Industrials Consumer Total Technology, Media, and (1) Telecommunications ("TMT") BRG Q1 2020 BRG Global and Domestic Pricing Trends Q1 2024 3 EV/EBITDA Multiples (1) 4 10 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Median Median Median Median Median Median Median Median Median Median Global Multiple EV Count Multiple EV Count Multiple EV Count Multiple EV Count Multiple EV Count Consumer 11.6x $ 110 20 10.0x $ 53 32 8.9x $ 42 29 8.8x $ 415 26 11.8x $ 400 25 Energy and Utilities 4.7x 2,000 7 2.0x 248 3 3.8x 1,359 10 4.9x 128 13 4.7x 283 4 Healthcare 11.0x 1,489 7 7.2x 169 28 9.8x 141 27 13.8x 202 32 10.4x 550 11 Industrials 8.3x 336 16 7.3x 277 16 7.6x 446 25 5.9x 125 25 7.6x 306 18 Materials 6.9x 268 16 12.5x 134 19 6.4x 127 15 8.6x 505 16 8.5x 301 15 TMT (2) 10.5x 179 24 13.1x 110 31 8.6x 39 33 14.4x 179 42 15.2x 155 19 4 10 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Median Median Median Median Median Median Median Median Median Median United States Multiple EV Count Multiple EV Count Multiple EV Count Multiple EV Count Multiple EV Count Consumer 12.0x $ 257 6 12.7x $ 515 7 7.8x $ 90 5 19.2x $ 861 8 10.8x $ 1,551 6 Energy and Utilities 8.5x 4,400 4 2.9x 2,300 1 3.5x 8,108 3 6.2x 4,901 5 5.4x 373 1 Healthcare 18.5x 3,854 4 7.7x 675 13 10.3x 269 16 8.0x 155 12 14.5x 550 3 Industrials 13.3x 4,702 3 10.6x 1,100 7 8.2x 829 6 8.7x 862 6 8.1x 733 6 Materials (3) 7.6x 718 3 n/a n/a 0 7.8x 4,548 3 13.3x 5 901 3 12.2x 2,120 2 TMT (2) 70.2x 570 5 8.3x 217 9 18.0x 120 10 13.8x 207 16 35.3x 900 5 EV/EBITDA Multiples (4) Commentary (1) Changes in EBITDA multiples of 0.5x and less are characterized as not significant. Changes in Enterprise Value of 10% and less are characterized as not significant. Median Enterprise Value is in USD millions. (2) TMT refers to Technology, Media, and Telecommunication. (3) In Q2 2023, there were no domestic transactions within the Materials sector with publicly available EBITDA multiples. (4) Graphed data excludes any multiples above the 90th percentile and the 85th percentile for the global and U.S. markets. BRG deemed these multiples as outliers and not representative of the market. Source: S&P Global Market Intelligence as of 4/8/2024. Pricing information is based on publicly available data as of Q1 2024 end as obtained from S&P Global Market Intelligence and evaluated by BRG. Pricing trends exclude Real Estate and Financials. $ in millions Globally, we have seen QoQ increases in pricing multiples across three sectors, a decline in one, and limited movement in two. Healthcare experienced the largest decrease, moving from 13.8x in the prior quarter to 10.4x in Q1 2024. The Consumer sector, on the other hand, experienced the largest increase moving from 8.8x to 11.8x. Domestically, two sectors experienced multiple expansion and four sectors experienced a contraction in multiples. In the U.S., Consumer saw the largest decrease in multiples QoQ, contrasting global trends. The U.S. TMT sector, on the other hand, witnessed the largest increase in EBITDA multiples, growing from 13.8x in Q4 to 35.3x in Q1 due to the closing of previously announced acquisitions of Splunk and EngageSmart at 167.7x and 73.6x, respectively. On a global scale, median EVs increased for three sectors, remained relatively flat for one, and decreased for two. Healthcare exhibited the highest increase in median EV, 171.9% QoQ, driven by two international pharmaceutical deals involving the acquisitions of Dechra Pharmaceuticals and Taisho Pharmaceuticals. Materials exhibited the largest decrease in median EV globally, falling 40.3%. Domestically, median EVs increased across four sectors and decreased for two. U.S. TMT median EV surged 334.9% while median EV fell 92.4% in the Energy and Utilities sector as firms are expected to focus capital on their own portfolios to take advantage of tax credits and other federal incentives introduced as part of the Inflation Reduction Act. 0.0x 10.0x 20.0x 30.0x 40.0x 50.0x Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 0.0x 10.0x 20.0x 30.0x 40.0x 50.0x Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Global EV/EBITDA EV/EBITDA United States 3rd Quartile Max. Min. 1st Quartile Median BRG Q1 2020 BRG Deal Volume by Market Capitalization and Industry Q1 2024 4 Number of Q4 2023 and Q1 2024 Deals by Market Capitalization and Industry 4 Global $0-500M $500M-$1B $1B+ United States $0-500M $500M-$1B $1B+ Q4 2023 Q1 2024 Q4 2023 Q1 2024 Q4 2023 Q1 2024 Q4 2023 Q1 2024 Q4 2023 Q1 2024 Q4 2023 Q1 2024 Consumer 232 205 13 8 10 11 Consumer 66 39 4 3 4 5 Energy and Utilities 117 91 14 4 16 8 Energy and Utilities 24 21 7 3 9 6 Financials 114 112 13 7 8 11 Financials 33 34 7 3 5 5 Healthcare 140 121 10 7 12 12 Healthcare 45 40 4 3 4 10 Industrials 219 206 6 5 14 11 Industrials 36 37 2 0 6 4 Materials 238 219 7 5 8 6 Materials 31 20 3 2 2 2 TMT (1) 248 236 13 11 14 3 TMT 77 70 3 4 9 3 Selected M&A Transactions Deal Commentary Selected Bankruptcy Filings (1) TMT refers to Technology, Media, and Telecommunication. Source: S&P Global Market Intelligence as of 4/8/2024, S&P Capital IQ, Forbes, CNBC, Reuters, Company Press Releases • • • • • • • • • Livent has merged with Australian lithium producer Allkem. The newly created entity, Arcadium Lithium, has a global presence across major producing regions in Australia, Argentina, and Canada. The merger comes following a drop in lithium prices and a lag in EV uptake, with more deal activity expected in the space. RBC's acquisition of HSBC Canada is expected to create an enhanced banking experience for RBC customers through its international banking capabilities and increase domestic ownership of Canada's banking sector. Bristol Myers Squibb completed its acquisition of Karuna Therapeutics, bolstering its neuroscience portfolio through the addition of drugs such as Karuna's lead asset KarXT, which is undergoing clinical trials to treat psychosis in schizophrenia and Alzheimer's patients. Capital One has agreed to acquire Discover in an all-stock transaction valued at $35.3 billion. The deal will have a significant impact on the credit card industry and could reduce the market shares of Visa and Mastercard if Capital One transitions credit card customers to Discover. After signing a definitive agreement to acquire Vodafone Italy, Swisscom plans to merge the business with Italian subsidiary Fastweb, diversifying its regional exposure. The deal is one of many as recent consolidation in the fragmented European telecom industry is expected to end price wars and boost profit margins. Home Depot has announced the acquisition of SRS Distribution, the largest deal in its history. The company aims to drive sales by accelerating business from contractors and other home professionals as demand from do-it-yourself consumers has moderated. Brazilian airline GOL Linhas Aereas filed for Chapter 11 in January. Despite improved operational performance in 2023, the company still faced a heavy debt burden, as well as cash flow pressures stemming from high lease payments, capital expenditures, and working capital outflow. Audacy, the second-largest US radio broadcaster, filed for Chapter 11 following the broader decline of broadcast radio advertising. The company has made significant investments in its digital revenue streams, including audio streaming and podcasts, with these segments yet to become major sources of revenue. Enviva, the world's largest producer of wood pellets used for energy production, filed for bankruptcy after missing a $24.4 million interest payment. The company's bet to buy wood pellets from a customer and resell them for more backfired as pellet prices have plunged. Deal size information is based on publicly available data as of Q1 2024 end as obtained from S&P Global Market Intelligence and evaluated by BRG. For $10.6B For $11.5B For $12.6B Closed January 2024 Closed March 2024 Closed March 2024 Has merged with Has acquired the Canadian arm of Has acquired For $35.3B For $8.7B For $18.3B Announced February 2024 Announced March 2024 Announced March 2024 Specialty Chemicals Banking Biotechnology Italian arm of Announced acquisition of Announced acquisition of the Announced acquisition of Airlines Broadcasting Renewable Energy Consumer Finance Telecommunication Building Product Distribution Has filed for Chapter 11 Bankruptcy Protection. Assets: $3.2B Liabilities: $6.7B Has filed for Chapter 11 Bankruptcy Protection. Assets: $2.8B Liabilities: $2.7B Has filed for Chapter 11 Bankruptcy Protection. Assets: $2.9B Liabilities: $2.6B Filed January 2024 Filed January 2024 Filed March 2024 Recent Insurance M&A Trends • Overall, 2023 was a quiet year for insurance M&A as the banking crisis and high interest rates limited transaction volumes and insurance companies used the time to rebalance their portfolios. Looking forward, M&A activity is expected to rebound in 2024 driven by private equity investors looking to consolidate businesses, capture opportunities in emerging sectors, and rebalance their risk profiles. • Private equity firms have historically acquired life and health insurers to increase assets under management while insurers have increasingly looked to pivot to asset-light business models. • While M&A in the P&C market has been slow recently, if climate change perils become persistent, insurers may need to consolidate or seek reinsurance to shore up their balance sheets. Disruptions in the Insurance Sector • While insurance bankruptcies are relatively rare, Florida has recently been an exception. Distress in the Florida insurance market over the past few years has been driven primarily by climate-related perils and excessive litigation costs. Dominated by local insurers with insufficient capital to withstand outlier events, the market is heavily dependent on reinsurance, which in turn has retreated from the market. The state of Florida has recently enacted legislation to reduce unnecessary litigations, which is expected to all
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