U.S. PE M&A up 35 pct so far in 2016: Thomson Reuters

Surprise! Private equity M&A hasn’t been that bad this year and is on pace to beat 2015.

The value of U.S. announced PE deals jumped 16.4 percent to $29.86 billion in the third quarter, Thomson Reuters data said. The number of Q3 transactions dropped 8.2 percent to 168, TR said.

This year through the nine months, 548 PE deals have been announced, up 3.2 percent from 531 a year earlier. Deal value is up fully 35 percent to $75 billion from the year-earlier period’s $55.49 billion, Thomson Reuters said.

“Activity has been pretty good all year,” said Patrick Huard, a corporate partner in Morrison & Foerster’s San Francisco office. “Last quarter’s activity was pretty high.”

Huard said the funds he represents are “optimistic” that the fourth quarter will continue the busy trend. The funds have capital they want to deploy. Valuations remained high in the third quarter, however, making buy-side opportunities difficult in the middle market, Huard said.

“The capital is available, but it’s a matter if they can match the high valuations,” he said.

High technology was the quarter’s busiest sector with 34 deals valued at $17.6 billion, Thomson Reuters said. The worst? It’s a tossup between retail, which had six deals, and materials, which had seven. Thomson Reuters did not list deal values for either sector.

Here’s the quarter’s Top 5 deals:

1. Apollo Global Management’s $4.12 billion deal to buy Rackspace, a managed cloud computing company, emerged as the quarter’s top deal. Searchlight Capital Partners is also investing in the transaction.

2. In second place is Platinum Equity’s $4 billion acquisition of Emerson Electric Co. St. Louis-based Emerson makes factory-automation equipment, Reuters reported.

3. Thomson Reuters’s $3.55 billion sale of its Intellectual Property and Science business to Onex Corp and Baring Private Equity Asia ranked third. The deal includes an equity investment of about $1.6 billion, of which Onex is putting in $1.2 billion.

4. Fourth is TPG’s buy of a majority stake in Intel’s cybersecurity unit, formerly known as McAfee. TPG will own 51 percent of McAfee, valuing the company at $4.2 billion, including debt, Reuters said.

5. EQT’s buy of Press Ganey, which provides performance analytics for healthcare companies, for about $2.35 billion, placed fifth. Vestar Capital Partners is the seller.

Action Item: Reach Patrick Huard of Morrison & Foerster: phuard@mofo.com.

People sit outside the New York Stock Exchange during the morning commute in New York City on Sept. 15, 2016. Photo courtesy Reuters/Brendan McDermid