DC Advisory's US Private Equity Mid-Market Monitor: Q2 2023 & Outlook
Date
September 28, 2023 • 19 min read
DC Advisory US' senior bankers share their reflections on the second quarter of 2023, and anticipated key trends driving deal flow for the rest of the year.
A note from US CEO, Bill Kohr:
“We expect 2024 to bring new activity to the US market as private equity firms deploy capital in innovative ways for both buyers and sellers. However, it will take time for transactions to come to fruition.
The past few years have been tumultuous in terms of private equity dynamics and Q2 2023 continued to be a slow and challenging fundraising environment, leading to an overall decrease in M&A deals in the market.
The build-up of anticipated activity over the next six months is on track as the market stabilizes. We already foresee new opportunities being presented from companies that have been waiting out the storm"
Download the full report here
What's driving deal flow in 2023?
Sponsor Coverage
"As we complete 2023 and begin 2024, there are strong indications of increased momentum in the marketplace. Private equity investors are ready. While 2023 has been a 'down' year, it has been one of deal preparation and analysis to gain an understanding of the dynamics within the macroeconomic and geopolitical environment in order to establish a 'new normal' for transactions and terms going forward" - Daniel Graves, Managing Director
Aerospace, Defense & Government
"Aerospace, Defense & Government Services M&A volumes are expected to remain strong - fueled by multiple sector tailwinds, including robust budgets and strong buyer interest. 2023 deal volumes in the defense and government sub-sectors are on track to meet or surpass 2022 levels, which already exceeded 2019 levels by 13%" - Ellis Chaplin, Chris Oliver, Managing Directors
Business & Tech-Enabled Services
"Several notable private equity to private equity minority stake sales have taken place in the Business & Tech-Enabled Services sector providing an opportunity for sellers to raise capital relatively quickly and quietly and provide a ‘mark to market’ on portfolio assets while retaining control" - Dan Skolds, Managing Director
Consumer, Leisure & Retail
"The near-term outlook for deal activity remains uncertain due to doubts regarding the outlook for the US economy. As we continue the path towards the ‘new normal,’ buyers and sellers will become increasingly confident in the condition of the US economy, and we expect to see activity pick up in the next six to twelve months" - Mark Goodman, Vice-Chairman
Education & EdTech
"Sellers are increasingly willing to enter the market in late 2023. Those who have prioritized preparation will be on track to transact as more favorable conditions arise" - Justin Balciunas, Managing Director
FinTech
"Companies that are the best candidates for capital raise and M&A have sustainable revenue growth, are profitable and encompass a business model with low Capex and operating leverage" - Tommaso Zanobini, Managing Director
Healthcare
"We expect to see an increase in M&A activity in the next year due to the large shadow pipeline of assets and available capital on the sidelines waiting to be deployed. The outlook is
strong as well-capitalized companies continue to focus on long-term growth and margin enhancing initiatives as they wait for M&A market conditions to improve" - Manish Gupta, Managing Director
Industrials
"We will likely see a pickup and increase in deal activity within the Industrials sector in the second half of 2023, especially for high-quality companies that are viewed as leading performers in their categories" - Matt Storkman, Managing Director
Information Services
"While there will continue to be a flurry of scaled assets coming to market, deal activity will likely remain relatively muted as buyers and sellers adapt to evolving evaluation expectations" - Joe Donahue, Vice-Chairman
GP Strategic Advisory
"Knowledge is power. It is important to be knowledgeable about this market and the various ‘tools in the toolkit’ at your disposal, even if a transaction of this nature does not make sense today. This market is very dynamic and constantly evolving so it is important to be current on the latest trends, market participants, and structures" - Hal Ritch, Donato de Donato, Co-Leads
Technology & Software
"We expect the remainder of the year to show improved M&A activity as sponsors are focused on building their
portfolio companies through acquisitions, and strategics are interested in companies that can fold well into their core business. However, we doubt volumes will reach previous levels due to the US financial environment and fundraising challenges" - Eric Edmondson, Vice-Chairman
Telecom & Digital Infrastructure Services
"M&A activity has slowed in 2023 for Telecom & Digital Infrastructure assets due to the uncertain macro-economic environment and a heavy investment cycle in most digital infrastructure sectors. As the need for capital continues, business plans mature, and the macro environment improves, we expect an increase in deal activity in 2024 and beyond" - Stan Holtz, Managing Director
Predicting future activity is an art and not a science and this analysis is not scientific. It is informed judgement – much like the best M&A advice.
This publication has been prepared solely for information purposes and is not intended to function as a “research report.” In particular, this means that it is not intended, nor does it contain sufficient information, to make a recommendation as to the advisability of investment in, or the value of, any security.
Additionally, this publication does not constitute or form part of, and should not be construed as, an offer to sell, or a solicitation of any offer to buy, or any recommendation with respect to, any securities. You should not base any investment decision on this publication; any investment involves risks, including the risk of loss, and you should not invest without speaking to a financial advisor.
For additional important information regarding this publication, please see our Insights & Publications disclaimer >
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