Worldwide, middle-market M&A transactions, those with transaction values less than US$1 billion, have been occurring at a rapid pace in the first month of Q4. Middle-market M&A in the United States, in particular, is seeing tremendous activity, whereas M&A in Europe is continuing to struggle.

In the US, at this pace, we expect over 4,000 transactions in Q4. This will represent an increase of over 11% as compared to the 3,604 transactions in Q4 of last year. This growth can be explained by a number of factors, but most importantly, corporations are using some of their large cash balances and the ability to issue low-interest debt to pursue synergistic and other acquisitions.

Traditionally, companies use their excess cash for either capital expenditures or acquisitions. According to a recent study published by Goldman Sachs, capital expenditures are not increasing as companies are deploying their cash for acquisitions, which provide immediate access to growth and less risk. This is, perhaps, the largest single driver in the current middle market M&A boom in the US. Furthermore, low interest rates are enabling companies to issue debt quite cheaply, thereby helping companies without enough cash to fund acquisitions.

In Europe, the M&A landscape is facing challenges due to various factors such as economic uncertainty, political instability, and regulatory changes. These uncertainties are causing hesitation among companies to engage in M&A activities, leading to a slower pace of transactions compared to the US market.

Despite the struggles in Europe, the Middle East and Asia are also experiencing an increase in middle market M&A transactions. The Middle East, in particular, is seeing a surge in activity driven by the region's efforts to diversify its economy and attract foreign investments. Asia, on the other hand, is benefiting from a strong economic growth trajectory and an increasing appetite for cross-border acquisitions.

Overall, the global middle market M&A landscape is dynamic and evolving, with different regions experiencing varying levels of activity. Companies are strategically leveraging their resources and taking advantage of favorable market conditions to pursue growth opportunities through M&A transactions.

Founded in 1987, Versailles Group is a Boston-based boutique investment banking firm advising lower middle-market and middle-market clients on mergers, acquisitions, divestitures, private placements, and fairness opinions. The firm works with business owners, private companies, family-owned enterprises, and corporate clients in the United States and internationally.

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.

The most notable M&A news in Q3 was that there were more transactions in the United States/Canada region than there were in Europe. This is unusual, but we fully expect it to continue in the coming quarters as there seems to be limited progress in the resolution of the economic issues in Europe.

In Q3, the total number of M&A transactions in the United States/Canada increased by 137 to 4,372, which represented a 3% increase year-over-year. The Africa/Middle East, Asia Pacific, and Latin America/Caribbean regions all saw larger percentage increases during the same time period, 4%, 9%, and 9%, respectively. The only region that experienced a decrease in Q3 was Europe, where M&A activity dropped by 12% to 4,220.

The net result of all of these changes was that the combined number of transactions worldwide fell by 1% year-over-year, from 12,146 to 11,993.

Historically, Q4 is the busiest quarter for M&A. Therefore, we are expecting a strong fourth quarter in most regions.

The most notable M&A news in Q3 was the significant increase in transactions occurring in the United States/Canada region compared to Europe. This shift is quite unexpected, but it appears to be a trend that will persist in the upcoming quarters due to the ongoing economic challenges faced by European countries. The divergence in M&A activity between these two regions reflects a broader narrative of economic uncertainty and market dynamics that are influencing global investment trends.

Founded in 1987, Versailles Group is a Boston-based boutique investment banking firm advising lower middle-market and middle-market clients on mergers, acquisitions, divestitures, private placements, and fairness opinions. The firm works with business owners, private companies, family-owned enterprises, and corporate clients in the United States and internationally.

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.

Over the past four quarters, there has been significant growth in M&A activity in the middle market of Latin America and the Caribbean. Both the number of M&A deals, aggregate value, and average value of M&A transactions in these regions have increased substantially.

The number of deals have increased in each quarter, from 45 in Q3 of 2011, to 83 in Q4 of 2011, to 107 in Q1 of 2012, and finally to 135 in Q2 of 2012.

Additionally, the aggregate value of these transactions increased substantially, from US$2,203MM in Q3 of 2011 to US$11,043MM in Q2 of 2012.

In terms of the average value per transaction, the first three quarters mentioned had fairly consistent figures (US$48.9MM, US$41.9MM, and US$43.6MM). However, Q2 of 2012 saw an 87% increase in the average value per transaction, jumping to US$81.8MM. A portion of this spike can be attributed to the M&A activity in energy and consumer staples, which experienced exponential increases.

As a result of these drastic increases in M&A activity, Brazilian middle market M&A now represents 31% of all middle market M&A deals in Latin America and the Caribbean. There are a number of reasons for this, including currency factors, changes in antitrust laws, growth in infrastructure projects in Brazil related to the impending Olympic Games and World Cup events, etc.

Versailles Group represented SuperMedia LLC (Nasdaq: SPMD) in its sale of Inceptor, a North American Search Engine Marketing company, to Didit.com. This is the second successful divestiture Versailles Group has completed for SuperMedia.

Versailles Group has over 25 years of experience in completing successful transactions. As an expert in international mergers, acquisitions, and divestitures, we would be happy to talk with you about how we could help your company with any M&A transactions you may be contemplating.

Here is a link, Yahoo Finance, to the actual Press Release, or the text is listed below for your convenience.

BOSTON, Aug. 22, 2012 /PRNewswire-iReach/ -- Versailles Group, Ltd. ( www.versaillesgroup.com ) announced today that the assets of Idearc Inceptor, LLC a provider of SEO, Paid Search Marketing and Social Media Marketing, and a wholly owned subsidiary of SuperMedia LLC (SPMD), have been acquired by Didit.com. Versailles Group acted as exclusive financial advisor to SuperMedia. Terms were not disclosed. The transaction closed on August 21st.

Versailles Group, a 25-year-old Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures, advised SuperMedia on the transaction. Versailles Group works with companies in the U.S., Europe, Canada, Asia, and South America.

"With Versailles Group's unique approach to Mergers & Acquisitions, we received responses on this transaction from over 200 prospective buyers in 25 different countries, said Donald Grava, Versailles Group's Founder and President. "We're excited that Didit emerged as the eventual buyer as it provides Inceptor with a number of synergies."

About Didit.com
Didit.com is a privately held industry pioneer in Search Engine Marketing and Digital Marketing founded in 1996. Didit's proprietary Maestro search and auction-based display campaign optimization technology combine with recent advances in the application of "Big Data" to SEM and display campaigns.

Didit pioneered the "Managed Technology" model of cross-medial digital campaign management for marketers and agencies, earning Didit.com both Inc. 500 and Deloitte Technology Fast 500 recognition as a rapidly growing company.

About Versailles Group, Ltd.

Versailles Group, Ltd. is a Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures. It provides its clients with a high level of personal attention, international experience, and professional execution. Since 1987, Versailles Group's skill, flexibility, and experience have enabled it to successfully close transactions, both domestically and internationally, in all economic environments. More information on Versailles Group can be found on its website, www.versaillesgroup.com.

Media Contact: Donald Grava, Versailles Group, Ltd., (617) 449-3325, dgrava@versaillesgroup.com

There has been a substantial increase in M&A activity from Q1 to Q2 of this year. There were 3,482 deals announced this past quarter, which translates into a 33% increase from the 2,613 deals announced in Q1. Additionally, the total transaction value has increased nearly 54% from US$243,961MM in Q1 to US$374,962MM in Q2. This surge has also resulted in strong growth in the average value per deal, up over 15% from US$93.36MM per transaction to US$107.68MM per transaction.

In terms of the number of M&A transactions, every sector saw an increase from Q1 to Q2. The most significant growth was seen in the healthcare and consumer staples sectors, with 68.1% and 42.3% increases respectively. With regard to the change in the total transaction value, all but one sector saw a surge (materials).

The following graphs further highlight the changes between the two quarters in each sector.

All signs indicate that M&A growth will continue in subsequent quarters. The largest companies still have significant cash reserves and financial buyers are eager to deploy their capital. Additionally, technology trends such as cloud computing and social media will force larger companies that cannot keep up with innovation to target smaller companies with cutting-edge technology.

Since the beginning of 2011, the proportion of deals completed by Strategic buyers versus Financial buyers has stayed fairly constant as demonstrated by the chart below.

One statistic that has changed, however, is the total transaction value per deal, which started to decrease after reaching a high in Q2 2011. The record low for the last 17 months was in Q1 2012.

If one analyzes average transaction value by type of buyer, for Financial buyers, it has decreased from $91.76MM to $61.82MM over the last 17 months. For Strategic buyers, average transaction value has decreased by a much smaller amount, from $55.16MM to $51.32MM in the same time period. As you can see from the chart below, this statistic is trending upward over the last few months for Strategic buyers, but remaining flat for Financial buyers.

Financial buyers are paying less per transaction now versus 17 months ago. We believe that this trend is the result of credit markets that remain unstable, causing leveraged buyouts to be more expensive and complex. Typically, Financial buyers pay less because they have to generate a return on invested capital, without the benefit of synergies. The chart above also demonstrates that the average value that Strategic buyers are paying per transaction is not decreasing because of companies’ desires to either make offensive or defensive acquisitions and because of their ability to derive synergies.

When Strategic buyers make acquisitions, they are often able to recognize both revenue and cost synergies. Revenue synergies occur when the buyer can sell its products through the target’s sales force, and vice versa. Cost synergies occur when the buyer can reduce costs of the combined companies by eliminating redundant costs.

As a result of the trends mentioned above, we expect the average price per deal will increase over time. Strategic buyers will continue to use their large cash balances, which are reported to total US$850 billion for US companies, to make opportunistic and synergistic acquisitions, and Financial buyers will need to pay more for deals, or they will risk losing an increasing number of deals to Strategic buyers.

In the first quarter of 2012, 248 middle market transactions were closed worldwide in the Information Technology (“IT”) industry. Transactions valued at less than $100 million represented approximately 80% of these deals.

One reason for a large percentage of the deals occurring in the lower middle-market is industry consolidation, and the need for companies to stay competitive. In February, Juniper Networks purchased Mykonos Software for $80 million to enhance its security offerings and stay competitive with companies such as Palo Alto Networks.

Another reason is because larger companies are eager to expand into related markets, and they are doing this by acquiring small, well-established companies. In January, AT&T purchased SuperClick for approximately $15 million to grow its presence in the hotel Wifi market. As this space becomes increasingly popular, AT&T looked to acquire a company with robust technology and many well-known clients. Superclick’s clients include Four Seasons Hotels, Jumeirah, and Marriott Hotels International, among many others.

These trends are prevalent not only in IT, but also across most other industries. Furthermore, with the continued acceleration of the U.S. GDP at the end of 2011, along with the optimistic economic data, we expect the number of middle market transactions to continue to increase in 2012.

M&A in 2012 is off to an incredible start. 2,853 transactions have been announced so far this year, compared to just 599 in Q1 of 2011. The total transaction value for all deals announced year-to-date is $333 billion, whereas it only was $95 billion in Q1 of 2011. These statistics show that companies are more confident in the future of the global economy, and are beginning to use the cash they accumulated over the past few years to expand through mergers and acquisitions.

Year-over-year, the Financials, Industrials, and Consumer Discretionary industries saw the largest increases in transactions on an absolute basis, whereas the Telecommunication Services, Industrials, and Materials industries saw the biggest gains on a percentage basis. As you can see from the chart below, all industries have experienced tremendous growth in the number of transactions this year versus the first quarter of 2011.

Looking at the trends from a geographical standpoint, Asia / Pacific saw the largest increases with the United States / Canada and Europe regions not far behind. The Africa / Middle East and Latin American / Caribbean regions saw the biggest gains on a percentage basis. To summarize, the year-over-year changes for all geographies are quite impressive, with each region seeing incredible growth in the number of transactions compared to one year ago.

We expect the number of transactions and associated transaction values to continue to increase throughout the rest of 2012 as an increasing number of companies look to stay ahead of their competition and industry consolidations continue.

Over the past three years, the emergence of the South American economy has not been a surprise to many. While Brazil may be the first country that comes to mind when one mentions a strong South American economy, other countries such as Argentina, Uruguay, and Colombia will start to make more headlines over the next two to three years. After all, their respective GDP growth rates on a year-over-year basis are the three highest in South America at 9.30%, 8.47%, and 7.7%.

From an M&A standpoint, in these countries combined, there were 42 more deals announced or closed in 2011 than there were in 2010. The associated transaction values jumped by $3.6 billion. In terms of the increase in number of transactions and the aggregate increase in transaction value, both increased by 22% from 2010 to 2011. Furthermore, almost 60% of all deals occurred in one of the four following sectors: Energy, Financials, Materials, and Industrials.

With strong macroeconomic factors, we expect M&A in these and other South American countries to continue the upward trend in 2012. Additionally, as more and more companies worldwide begin to see the tremendous growth opportunities that these countries present, the number of transactions should continue to increase every year.

Last year, M&A activity increased in leaps and bounds in most areas around the world. From Latin America to the Asia Pacific, to North America, new deals were announced with more regularity and at higher valuations this past year than at any time since 2007.

M&A truly returned in 2011; in many regions, we saw transaction levels reaching all-time highs. As the economy continues to gain momentum, we expect heightened levels of M&A activity.

One major trend in the Emerging Markets was that transaction volumes approached similar levels as those in Developed Markets, and numerous international transactions confirmed this. Versailles Group contributed to this trend by assisting in the divestiture of Brazil’s Brapenta Eletronica Limitada to UK-based Loma Systems, a subsidiary of US-based Illinois Tool Works (NYSE: ITW). This transaction was unique by its nature and structure, and is a major indicator of the way future Emerging Market deals will be done. For more information, see the press release.

In the United States, the major M&A trend was consolidation, which has been ongoing since early 2010. Mid-sized companies are being acquired by larger competitors seeking to acquire and capitalize on their efficiencies and market shares. Versailles Group witnessed this firsthand in numerous transactions, including advising its client Kenneth Crosby, on its sale to DXP Enterprises (NASDAQ: DXPE). This transaction was a perfect example of a large, public distribution company synergistically acquiring a competitor for its market share, location, and industry-leading efficiencies. For the specifics of that transaction, see the press release.

An overall 2011 trend was that large corporations executed deals faster than ever. Versailles Group was retained by SuperMedia LLC (NASDAQ: SPMD) to divest Switchboard.com. From start to finish, this transaction was completed in 60 days. This demonstrates the fact that large corporations are more flexible and able to close transactions faster than ever in an increasingly competitive M&A environment. Our expertise allowed us to quickly link our client with multiple buyers and the deal was closed rapidly and at an excellent value.