Optimism in the industry remains strong, despite continued competition for deal flow, stagnantly low growth and historically high valuations, according to RSM US's Q3 2017 Business Products and Services Industry Spotlight. Companies operating in the business products and services (B2B) industry are more focused on short-term goals and less concerned about the broader regulatory and political environment. That said, many B2B firms have ongoing concerns around unresolved tax issues. Clients are anxious about what legislation will be passed and what impacts any new taxes will have on their businesses. Answers may arrive as soon as the fourth quarter.
Across both North America and Europe B2B mergers and acquisitions (M&A) volume continued to slide in Q3; despite declines in volume, activity in both continents showed strong value overall. Large transactions pushed the average deal size to $333 million in Q3, marking the second time since 2013 that transactions have averaged over $300 million.
M&A volume continued to slide in Q3, though value was in line with prior quarters. Almost $80 billion was spent in the third quarter via 1,221 completed transactions; total value represented a 4 percent increase over Q2 2017 while volume was down 18 percent. The story was roughly the same across North America and Europe, which both saw declines in volume but strong value overall. Large transactions pushed the average deal size to $333 million in Q3, marking the second time since 2013 that transactions have averaged over $300 million. The median was also historically high at $34.5 million, the highest quarterly mark in over four years. Values by subsector were mixed. Commercial products activity slid to just under $24 million, one of the lower totals in recent memory. Commercial services, however, popped back up to $42 million after three relatively slow quarters, at least on a value basis.
Transportation, meanwhile, saw about $14 million worth of activity; no quarter in 2016 saw more than $4.7 million. One trend worth keeping an eye on in transportation is an upswing in self-driving technology platforms. According to Harshad Khurjekar, principal of transaction advisory services at RSM US, self-driving technology should prove an advantage to the B2B space. “If fully and properly implemented, self-driving truck technology should eventually reduce the number of accidents and improve productivity, since we can expect to have trucks driving 24-7,” says Khurjekar, adding that it remains to be seen how well the technology is implemented.
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