While U.S. merger and acquisition deal value has edged lower in 2016 from year ago levels, presently at $1.19 trillion compared to $1.61 trillion a year ago, one particular segment of deal making is seeing a modest improvement. Specifically, announced U.S. LBO deal value this year currently totals over $70 billion up from the year ago total of $62.4 billion.
Topping this year’s LBO activity has been an Apollo Global Management-led investor group’s agreement to acquire security and alarm services company The ADT Corporation (NYSE:ADT) in a transaction valued at $12.5 billion on February 14, 2016. According to S&P Global Market Intelligence data, that deal ranks as the largest U.S. LBO since the February 2013 purchase of H.J. Heinz Company by 3G Capital Management LLC and Berkshire Hathaway Inc. for $28.7 billion.
Following the ADT purchase, the year’s second largest U.S. LBO is Hellman & Friedman LLC, Leonard Green & Partners, L.P. and GIC Pte. Ltd. signing a definitive agreement to acquire a majority stake in healthcare cost management solution provider MultiPlan, Inc. for $7.5 billion on May 5, 2016. Most recently, Canadian private equity firm Onex Corporation (TSX:OCX) entered into an agreement to acquire grocery chain Save-A-Lot, Inc. from SUPERVALU Inc. (NYSE:SVU) for $1.4 billion on October 16, 2016. That deal ranks as the largest U.S. LBO in a month when Vista Equity Partners entered into a definitive agreement to acquire Infoblox Inc. (NYSE:BLOX) for $1.5 billion on September 16, 2016.
Information technology stands as the largest sector this year for U.S. LBO activity with over $20 billion in announced transactions. Industrials rank as the second most active sector for U.S. LBOs with $14.7 billion followed by healthcare with $14.2 billion. Based on the number of transactions, the consumer discretionary sector ranks first for U.S. LBOs to date this year with 228 deals followed by the industrials sector with 172 and financials with 134 announced transactions. In total, a typical LBO announced this year was valued at 12.2x a target’s twelve-month trailing revenue and 26.5x EBITDA. That compare to average calculated valuations for LBOs announced a year ago at this time of 3.3x revenue and 17.3x EBITDA.