The global M&A Market in the first half of 2023 saw deal values drift lower especially in Q2, while the number of announced completed deals saw near record highs. So, deal volume was up whilst overall transaction values are down. According to Pitch Books recent announcements, there are two conflicting forces at play: significantly higher costs of money, as interest rates rise, and the massive cash piles that remain on corporate balance sheets.
Pitch Book report that Private Equity dry powder stands at $1.3trilion, just 9.7% shy of its all-time high.
Corporations have an even larger cash pile, in the US alone its stands at $5.8 trillion! Whilst not all of it is earmarked for strategic investments and acquisitions, the prospects for a continuation of high numbers of transactions remain strong.
Price multiples have been in correction mode – down 20% (using EBITDA multiples) from the 2021 peak. However, high deal volumes are suggesting a theme of high frequency dealmaking at smaller sized deals. Goldman Sachs, the world’s largest M&A advisor, recently reported increased activity with an investment banking backlog for the first time in a year.
High-frequency smaller transactions could be great news for the owners of SME’s seeking a successful exit as larger trade players seek to put their cash piles to work – Tim Clarke at Pitch Book thinks current conditions suggest a strong M&A rebound in 2024 – time will tell.
On the ground in Australia, we see a continuation of strong appetite from corporate buyers for strategically important mergers with the business size of a target increasingly becoming unimportant provided the “fit” makes sense. Additionally, we see record levels of interest by private equity and family offices for assets that meet their investment criteria, we also note a growing flexibility regarding criteria.
- Why M&A volume and value are diverging—and prices aren’t in sync with public markets. Pitchbook, Tim Clarke, July 29 2023 https://pitchbook.com/newsletter/why-ma-volume-and-value-are-divergingand-prices-arent-in-sync-with-public-markets