Q3 exit-market pace slowest of the year

U.S. sponsors in the third quarter sold companies at the slowest pace of the year.

Since hitting a five-year high in Q4 2017, exit volume has steadily declined.

All told, U.S.-based sponsors in the third quarter closed 128 deals totaling $20 billion, Thomson Reuters data showed. That was down from 132 exits totaling $24 billion in the second quarter, 164 deals totaling $28.8 billion in the first quarter and 159 deals for $55.3 billion in the fourth quarter of 2017.

The numbers are through Sept. 19, which gives some room for growth. The third-quarter totals trail the six-year quarterly average of M&A exits (146) as well as deal volume ($25.9 billion).

Of Q3’s 128 exits, 41 had disclosed valuations. Seven of these crossed the billion-dollar mark.

The largest transaction with disclosed valuation was Fortive Corp’s acquisition of Accurent. Fortive acquired the Austin software developer from Genstar Capital for $2 billion cash.

Just behind that deal was the $1.9 billion purchase of Polycom by Plantronics, which acquired the San Jose, California, communications-tech company from Siris Capital Group.

The third-largest exit was completed by Advent International, which sold Morsco Inc, a Fort Worth-based wholesaler of commercial and residential plumbing equipment, to Reece Ltd for a total of $1.44 billion.

High tech led the way in Q3 exits, accounting for 26 percent of all M&A exits with 33 deals. Financials finished second with 14 deals (11 percent). Tied for third were healthcare and consumer products and services with 13 deals (10 percent).

IPOs follow suit

PE-backed IPOs also fell in the third quarter, with just half the number of deals compared with the second quarter. The seven companies making their debuts on the public market combined for a total of $1.34 billion.

It was the first quarter this year to show a drop in number of IPOs, though deal volume has slid each quarter.

The largest offering came from Focus Financial Partners, which raised $600 million for its IPO. The company offers financial advice across the U.S. and has begun to expand into Canada, the U.K., Western Europe and Australia. It is backed by KKR and Stone Point Partners.

As the accompanying “PE-Backed IPO Exits by Quarter” graph shows, the IPO market is erratic, with PE-backed IPOs fluctuating sharply quarter to quarter.


Additional Data

Buyout M&A Exits By Quarter

PE-Backed IPO Exits By Quarter

Q3 2018 Buyout Exits Through M&A

Q3 2018 M&A Exits Industry Breakdown

Select Q3 2018 Buyout Exits Through IPO