Deal Drivers Americas: Auctus Capital Partners Cited in Comprehensive M&A Report for First-half of 2019 and Midwest Trends

By September 4, 2019 Auctus in the News

When covering mergers and acquisitions activity in the Americas, Mergermarket turned to industry leaders — including Auctus Capital Partners’ Muhammad Azfar — for insights on the first-half of 2019 and Midwest trends.

Published by Mergermarket in association with Merrill Corporation, the half-year edition of Deal Drivers Americas provides an in-depth review of M&A activity and trends, and offers insights into how announced deals will impact M&A for the year ahead. Insights from Auctus can be found in the report’s Midwest Overview (below), or on page 70 in the full PDF (available here).

Deal Drivers Americas – HY 2019: Midwest Overview

Transactions in the Midwest for the first half of the year totaled US$169bn, a 72% increase on the second half of 2018 despite volume falling to its lowest level since H2 2013. The higher value, lower volume dynamic is being driven by easily available financing, a solid economy and an ongoing battle between strategics and sponsors.

“There were a variety of factors that drove continued strength in the Midwest market, but the most noticeable have been recent tax legislation, the amount of capital that both strategic and financial buyers have to deploy, strong capital markets and continued access to cheap financing,” said Andrew Dickow, managing director at Greenwich Capital Group.

Nick Jachim, group head at Stout Investment Banking, agrees. “The strength of the local economy and buyers’ ability to borrow funds are driving continued, robust M&A activity in the Midwest,” he said. Meanwhile, Muhammad Azfar, managing partner at Auctus Capital Partners, believes that “convergence is one common driver across the largest megadeals as well as lower middle-market transactions.”

The ongoing tussle between private equity and their corporate rivals is a major driving force behind the region’s strong showing in the M&A market in the first half of 2019. Of the top 15 deals, seven were by done by PE firms including BlackStone’s US$13.4bn purchase of warehouse assets from GLP.

“There is just so much cash available, around US$1trn for strategic acquirers, and, even more, around US$3trn for PE firms and they need to fuel inorganic growth,” said Rob Griggs, senior vice president at Corum Group.

Alongside the surfeit of cash, PE deal activity is being driven by a number of other factors, according to Dickow. “Financial buyers have the flexibility to do a majority deal that allows business owners to take some ‘chips off the table’ today, while still being able to share in the potential future growth,” he said. “Additionally, more PE firms are launching minority buyout funds to provide even more optionality to sellers, which is also driving more activity with financial buyers.”

Sector-wise, buyers have been transacting across a variety of different industries. As Jachim said: “There are several dynamic sectors right now that we anticipate will continue on their torrid pace including: diversified industrials, branded consumer products, food and beverage, technology, and healthcare including medical devices, healthcare services, and pharma.”

Of these, the traditionally strong industrial, manufacturing & engineering (IME) sector was once again out in front in H1, snatching 32% of all value and 27% of volume in H1 with the largest IME deal being PE firm Platinum Equity’s US$2.5bn buyout of packaging and labels provider Multi-Colour.

Greenwich’s Dickow feels that technology could be the one to watch in the future. “There has been and will continue to be a significant amount of activity in the technology sector, which is driving more cross-sector deal activity,” he said. “As many traditional industrial companies look to remain relevant in evolving industries, they are seeking advancements in their technology capabilities to remain relevant.

Azfar agrees that technology will drive deal activity. “What’s interesting, especially across the Midwest, is the opportunity we are seeing in tech’s intercept with other industries, mostly aimed at enhancing end-user experience.”

As for the remainder of the year, experts believe that there will be no let-up in the boom in Midwest dealmaking. “For the remainder of 2019, it is very busy,” said Griggs. “If or when the public markets correct, the valuations may come down, but the cash will go that much farther in the M&A process.”

While Azfar also feels that the M&A tide is unlikely to turn, he also sounds a note of caution. “Across the Midwest, we can expect positive regional growth for the year ahead,” he said. “In general, while the spate of M&A activity is expected to continue, navigating the economic realities will not be a simple endeavor. With the possibility of a downturn in the coming years, companies across all sectors should adjust their long-term risk appetite and focus on strengthening their balance sheets.”


Article was included in the half-year 2019 edition of Deal Drivers Americas, written by Mergermarket in association with Merrill Corporation. This report provides an extensive review of M&A activity and trends across North America and Latin America throughout the first half of 2019.