Q1 2021 Middle Market M&A Update

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GCG’s Q1 2021 Middle Market Update provides an overview of the latest trends in the market, including recent performance of select sectors and the state of the middle-market M&A environment.

Key findings include the following:

    • GCG’s proprietary public company middle-market industry sector performance index shows positive 12 month returns for each industry in our index. Key highlights include all the GCG middle-market index sectors outperforming the S&P 500 index. The Aerospace and Defense (“A&D”) industry has been uniquely challenged during the economic downturn and the pandemic and had lower returns, while Technology, Consumer Goods, Industrials and Manufacturing, and Business Services all had strong performances during this period.
    • GCG’s small cap public company index revenue and EBITDA multiples have significantly increased during the first quarter of 2021. The current multiples are higher than they were pre-pandemic with an approximate 110% increase over the last 12 months, representing a dramatic shift in valuations in 2021. Given this shift, we expect to see significant earnings and revenue increases during the next 12 months.
    • Middle-market transaction volume for the 1st quarter of 2021 was slightly below Q4 2020 and nearly on par with Q1 2020. The value of deals in Q1 of 2021, however, was 19% higher than the prior year. Much of the uncertainty due to the COVID-19 pandemic and the impact on target companies which contributed to large declines in Q2 and Q3 of 2020 was alleviated by Q4 2020, with a resumption of deal-making activity. We anticipate that deal activity will improve dramatically over the next 12 months as the economy shows significant growth and the pandemic eases.
    • Q1 2021 deal activity by sector was substantially different from Q1 2020 in terms of the sectors with the most market share. Information Technology was the dominant sector with 19% of middle-market transactions announced and closed in Q1 2021. A few other industry sectors also became more prominent on the deal front over the past year with Industrials, Healthcare, Financials, and Consumer Staples increasing their share of deal activity.

Click here for the full update.

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