Friday, November 5, 2021

We’re coming up to our 10-year anniversary at Calcbench, so we wanted to take a look at corporate M&A activity over the last decade. Although Calcbench has the data for all corporate acquisitions, we decided to focus on the S&P 500, since these firms typically dominate the corporate acquisition market.

We start by examining the number of acquisitions as well as the total price paid for those targets. As you can see from Figure 1, below, the number of acquisitions has been tapering downward since 2016. On the other hand, we see a jump in the amount paid for those acquisitions starting in 2015 (orange line, with right-side vertical axis measured in billions). Those numbers have somewhat declined in recent years, but not nearly as much as the drop in number of deals. Purchase prices in 2020, for example, were still higher than the pop that happened five years earlier.

Well, if the number of acquisitions goes down, but the total amount paid for these acquisitions stays high, that must mean that the average price has gone up. So we examined that.

Figure 2, below, shows the mean and median purchase price. As you can see, both the mean and median purchase price have increased. The median price actually doubled from 2014 to 2021! The implication: although S&P 500 companies are buying fewer companies, on average they are paying more for each one.

We were also interested to see what portion of the purchase price is assigned to goodwill. The chart above shows that about 60 percent of the purchase price is typically allocated to goodwill. This level seems to be relatively constant over the last decade.  

Want more? Calcbench has all corporate acquisition activity, as well as purchase price allocation data, in our business combination portal (available for Professional level users). Want to know more about goodwill? Our latest webinar and blog are great sources of information.

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