BDO Capital Business Services Q3 2019 M&A Market Update

November 2019


Following another year of strong transaction volume in 2018, M&A activity has remained at healthy levels through the third quarter of 2019. 2019 transaction volume has continued to be driven by overarching market themes, such as low cost of capital, large balance sheets, and the desire to offset low organic growth. These market factors are expected to remain prevalent and drive M&A activity through year-end.

Business Services continues to be an active segment of the M&A market. Through Q3 2019, the sector witnessed seven megadeals (transactions exceeding $1 billion) compared to six through Q3 2018. Interest in the sector drove the year-to-date median Enterprise Value (EV)/Revenue multiple up to 1.4x from 1.0x in 2018 and the median EV/EBITDA multiple increased to 12.8x from 12.4x in 2018 as both strategic and private equity buyers look to deploy record amounts of cash. M&A transaction volume has remained strong this year as global Business Services market participants seek to expand their service offerings and customer base inorganically through acquisition. We expect this trend to continue to drive significant M&A volume and expand valuation multiples.

Additionally, public equity markets have continued to perform at record levels with BDO Capital’s Business Services index outpacing the S&P 500’s equity performance, as demand for outsourced services continues to increase. Industry growth continues to be driven by global businesses desiring to become more agile in both strong and recessionary market environments allowing them to scale with greater efficiency.