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Central Pa. sees Q4 spike in M&A activity, bucking national trends

Although merger and acquisition activity was flat nationally, the midstate saw a significant jump in dealmaking at the end of 2015, according to Philadelphia-based consulting firm Baker Tilly Capital LLC.

Midstate companies notched 50 deals in the fourth quarter, up 35 percent over the final quarter of 2014.

“In the grand scheme of things, these numbers bounce around from quarter to quarter, but M&A tends to be fueled by capital and confidence,” said Jason Cunningham, the firm’s managing director. “The fact that there was a meaningful increase in activity usually translates to increased confidence for business owners and a robust business climate.”

Central Pennsylvania’s fourth-quarter M&A activity was led by the industrial sector, which accounted for 40 percent of deals that closed in the fourth quarter.

The consumer, financial, information technology, health care and utilities sectors accounted for the rest of the deals.

“We saw continued strength in the market and a tremendous amount of capital available to get deals done,” Cunningham said in January. “That’s not going to change heading into 2016, barring some catastrophic macroeconomic event.”

Higher interest rates could compel some buyers to “tap the brakes a little on the M&A market,” he said then. “If we see headwinds in the financial markets, that tends to impact larger deals first.”

Deals with reported values were smaller in the fourth quarter. The aggregate deal value was $1.7 billion, down from $3 billion in the third quarter and $3.5 billion in the fourth quarter of 2014, according to Baker Tilly.

The biggest highlighted deal in the fourth quarter with a reported value was Astellas Pharma Inc.’s $300 million purchase of Derry Township-based Immunomic Therapeutics in October.

The acquisition by the Japanese pharmaceutical company was one of the biggest biotechnology deals in Central Pennsylvania history. 

Astellas wanted a technology developed by Immunomic Therapeutics — also known as Immunomix — to make a vaccine for red cedar allergy, which affects about one-quarter of Japan’s population, and other human allergies.

In late December, Derry Township-based Pennsylvania American Water acquired the Fairview Township wastewater system in York County for $16.8 million.

Pennsylvania American, the largest water utility in the commonwealth and part of publicly traded American Water Works Co. Inc., also spent $3.8 million in October to acquire five municipal and privately owned water and wastewater systems in Butler, Clarion and Northumberland counties.

Baker Tilly primarily tracks the lower end of the middle market, representing deals between $5 million and $250 million. The majority of the deals the firm tracks do not have reported values.

The reports include the markets of Harrisburg, Lancaster, the Lehigh Valley, Reading and Altoona/State College.

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