

May 24, 2023
The CMG team just returned from the annual DealMax conference (formerly Intergrowth) hosted by the Association for Corporate Growth (ACG) in Las Vegas. This annual conference (which was chaired by CMG’s Ramsey Goodrich a few years ago) brought together a record breaking crowd of more than 3,000 M&A transaction professionals including private equity firms, family offices, strategic acquirers, financing sources, investment banks and other transaction service firms.
Several key themes emerged from the conference. We are happy to share the collective perspective on the current M&A landscape.
M&A Activity
The past two quarters have seen a dramatic slowdown in M&A volume, especially when compared to the blistering activity in 2021 and early 2022. This stems from persistent headwinds, including rising interest rates, bank failures, and uncertain economic, and persistent geopolitical concerns.
The transactions that have closed in 2023 have been primarily driven by:
Notably, in 1Q 2023 more than 65% of transactions under $100 million involved either founder-led family-held businesses (source: Pitchbook). While transaction volume is down, the drop has been driven by private equity investors concerned about the rising cost of capital or larger transactions where the financing markets are more volatile. The core middle market M&A is less volatile and there is still plenty of capital looking for the right opportunities.
Supply and Demand Imbalance for "A" Quality Companies
Valuations, in general, have pulled back from the peak levels observed in the ‘frothy’ markets of 2021 and early 2022. As one equity firm stated emphatically that sellers today “missed the peak, but valuations for good companies remains really strong.” With fewer companies in the market recently, “there is definitely a supply and demand imbalance for "A" quality companies and we continue to pay up for great companies.”
With that said, there was abundant enthusiasm for a rebound in the M&A markets later this year and early 2024. PE groups are preparing their portfolio companies, while also keeping their ‘powder dry’ for an active market. Similarly, strategic buyers will be more active once there is more stability and confidence in the economic outlook.
Unless your company falls into the "A" or "B+" quality, there is no need to hastily rush to market. We recommend using this time to plan and prepare for a future transaction by assembling your Core Four M&A team: investment banker, legal counsel, quality of earnings and wealth management team. You can never start too early, so take advantage of this temporary lull in order to maximize the future value of your business.
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If you have any questions or need guidance selling your business, navigating the ever-evolving M&A market or steps to prepare for a transaction, please do not hesitate to reach out to us.
For more than three decades, Carter Morse & Goodrich has excelled at maximizing shareholder value for our clients and leading transactions through to successful completion.
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