Domestic industrial distribution M&A activity in 2019 outpaced 2018 levels, increasing 8.4% to 348 total transactions for the year. Global industrial distribution M&A activity remained flat in 2019, increasing 0.4% to 778 transactions. Global and domestic M&A volumes reflect a second consecutive year of record transaction volumes, highlighting the healthy M&A appetite of both strategic and private equity acquirers. Mirroring this record year, public equity valuations rebounded to levels seen in early 2018. S&P 500 valuation multiples increased significantly from the prior year to a mean 14.1x EV/EBITDA (Q4 2018 mean of 11.0x), while the mean industrial distribution EV/EBITDA increased to 11.4x compared to 10.3x in Q4 2018.
Manufacturing sector indicators continued to trend into contractionary territory in Q4 2019 with global trade remaining the most significant cross-industry issue. The Institute for Supply Management (“ISM”) New Orders Index declined to 46.8 in December 2019, five consecutive months at contractionary levels. The ISM Purchasing Managers’ Index closed 2019 at 47.2, down from 47.8 in September 2019 (lowest reading since June 2009). The Chicago Fed Midwest Economy Index, which measures nonfarm economic indicators, decreased to -0.5 in November 2019, indicating below-average growth for the Midwest economy. The ISM Production Index finished December 2019 at 43.2, decreasing from 47.3 in September 2019. The Consumer Price Index, a measure of inflation, rose to 257.9 in November 2019 (0.6% growth over September 2019).
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