2015 is likely to close a record year in terms of total M&A in North America and Europe. Yet according to our latest M&A Report, sponsor-backed activity slowed quite considerably last quarter, registering its lowest completed deal count since 3Q 2013 at 1,167. Removing the massive $45 billion Kraft/Heinz combination, total PE-backed M&A value came in at a modest $73 billion, a near 20% decline from the $91 billion PE accounted for in 1Q and a 27% drop from the same period last year.
GPs looking to deploy heightened levels of dry powder are navigating a changing deal environment, where relative multiples to close transactions remain high and pipeline quality isn't as strong as what was seen last year. Further, growth concerns and volatility hit public markets noticeably in 3Q, in turn sparking revised and lowered mark-to-market valuations across PE portfolios, in addition to the plunge in public securities held by many of the larger, more diversified PE shops. The slump in PE-backed M&A can be attributed to a bit of a regrouping amongst GPs as they look to re-assess the global investment landscape moving forward. Investors will likely remain cautious, especially regarding price, yet transactions should still get done.
For free access to our 4Q 2015 M&A report, with data and analysis on M&A activity over the past few years, click here. PitchBook clients can access the report in the reports library of our platform; premium newsletter subscribers were emailed a copy last week.