June 17, 2014

Metro-DC Area Capital Markets Snapshot May 2014

According to data compiled by Capital IQ, year-to-date the Metropolitan DC Capital Markets have seen a slight uptick in deal activity with nearly 100 M&A and private placement deals announced through May 2014 (excludes real estate related deals.).
This represents a 17% increase in the volume of deals closed year-over-year. Of these, approximately 40% of the transactions represented private placements of equity or debt securities, which represents 23% year-over-year growth. The sectors that experienced the most activity over this period were not surprisingly the professional services and software verticals representing 17% and 18%, respectively. IT Services also demonstrated strong activity. That said,  those serving the government vertical are still underrepresented based on historical norms. Worth noting is that deals in the strategic communications space led the professional services category with four closed deals year-to-date.

Some noteworthy transactions include:

Vocus – Last month, Vocus, a maker of cloud-based software for marketing and public relations was bought by private equity firm GTCR for approximately $450 million, a premium of 48% to Vocus’ stock price.

Aptiv Solutions – In March, Aptiv Solutions, a leader in the design and execution of clinical trials for pharmaceutical and biotech customers was acquired for cash consideration of $143.5 million by ICON plc, a global provider of outsourced development services to the pharmaceutical, biotechnology and medical device industries. Aptiv Solutions was owned by a consortium of PE firms, including DC-based The Halifax Group, SV Life Sciences, and Comvest Partners.

Audax Health Solutions – In February, Optum, a UnitedHealth Group Company acquired a majority stake in Audax Health Solutions, a healthcare technology company that enables consumers to manage their health through innovative digital offerings. Although terms were not disclosed, it was rumored that Audax achieved a very healthy multiple of revenue.

Qorvis Communications – In January, with over 80 professionals in Washington D.C., Qorvis Communications, one of the most respected independent public relations firms in the United States became part of MSL GROUP, a strategic communications subsidiary of the Publicis Groupe. This was one of four strategic communications firms headquartered in DC that transacted year-to-date.

We believe the rise in deal activity in the Metro-DC area is indicative of the overall recovery in the global M&A markets. There continues to be a lot of capital, both strategic and financial, seeking high quality investment opportunities. Notwithstanding the positive trends, we believe there is still strong expansion potential both in the pace of capital market activity and for valuations. Further, as the government services sector rebounds from sequestration, as well as the 2013 government shutdown and delays in the 2014 budgetary process, we expect deal activity in the DC Metro area will begin to accelerate.