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M&A Summary:

Q4 2018 - Mid Market

Updated: February 20, 2019

Q4 2018 was marked by geopolitical disputes and policy changes that affected the global economy and had a significant impact on markets around the world. The quarter started out on a high note with the leaders of Mexico, the United States, and Canada agreeing to the framework for a new regional trade agreement. This positive sentiment was short-lived, with Brexit and U.S.–China trade negotiations heating up and driving continued uncertainty. This and other headwinds reduced transaction volume by 10% between Q3 and Q4 of 2018, though we still saw a 2.2% increase on a year over year basis.

The utilities sector saw M&A activity flourish in the face of the uncertainty, with a significant increase in transaction volume during the quarter as disruptive new infrastructure and grid technologies continued to drive consolidation.

Q4 Transaction Highlights

In November 2018, Drive Autogroup acquired the Brimell Toyota dealership located in Scarborough, Ontario. Concurrently, Automotive Properties REIT acquired the automotive dealership's property and entered into a new long-term lease with Drive Autogroup.

The transaction is indicative of a few trends playing out in the automotive retail sector. The industry continues to experience consolidation, as dealership groups of all sizes look for acquisitions to grow and take advantage of greater scale. Further, dealerships often employ sizeable pieces of real estate that hold significant value; the optimal transaction for the vendor may include selling it. Depending on the buyer's strategy, this could require a creative approach such as bringing a real estate- focused partner to the table.

These trends pervade many other sectors throughout the country, and impact the outlook and approach to M&A for a great number of mid-market business owners.

Ryan Farkas
Managing Director, M&A and Capital Markets
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