Aerospace, Defense & Government Services

  • 2022 M&A deal volume in the ADG sector remains healthy although deal volume is unlikely to match 2021 levels
  • Valuations in the defense and government sector have remained strong with public company valuations up ~10% year to date, despite the broader market being down ~17.5%[9]
  • The global threat environment is driving a market upcycle despite budgetary pressures. On July 14, the House passed the 2023 National Defense Authorization Act authorizing USD 839BN for spending on national security[10]. This authorization represents a USD 37BN increase ov­­er the amount requested by the administration and sets the stage for the Senate to pass its version of the bill, which authorizes USD 847BN[11], when they return from the August recess
  • Near-peer threats are on the rise with Russia and China actively challenging regional sovereignty in Ukraine and Taiwan, respectively, likely driving an increase in global defense spending by neighboring countries, NATO and the United States. We believe increased defense spending will prioritize funds to counteract Russian and Chinese investments in disruptive technologies like A2/AD, hypersonics and long-range fires
  • The current geopolitical environment has increased potential for conflicts with near-peer adversaries motivating multi-domain training and joint-level operations to improve military preparedness. Western militaries have responded by updating their CONOPS to address a joint all-domain environment, prioritizing funding for requisite technology and defining procurement strategies
  • Regulators have doubled down on their anti-consolidation agenda at the top of the market with the FTC challenging the proposed, and now abandoned, USD 4.4BN bid by Lockheed Martins to acquire Aerojet Rocketdyne[12]. The Department of Justice has also sued to block Booz Allen Hamilton’s purchase of EverWatch, citing concerns over creating a single bidder for a single NSA contract[13]. Nevertheless, we believe the overall resilience of the government contractors in the public markets will prove to be a tailwind for industry deal volumes and valuations, as investors continue their flight to quality amid uncertain economic conditions

MergerMarket - Criteria: Target sector is Aerospace or Government, located in USA and transaction completed between 01/01/2022 - 30/06/2022

Business & Tech-Enabled Services

  • Quickly changing technology and increased skills specialization are driving the demand for highly specialized workers. The demand is outstripping the available source of this talent, which has been a growth challenge that companies are thinking about solving creatively
  • Modern management styles that are responsive to evolving workforce structures, and can create inclusive and diverse cultures while embracing corporate responsibility initiatives, are necessary to maneuver through labor challenges. Additionally, it is important to utilize a global talent pool to manage businesses effectively
  • Another trend we are seeing become more front and center is the integration into a customer’s infrastructure to improve the value proposition and customer retention. Integrating into a customer’s business processes increases switching costs, which increases the life of a customer and lowers sales and marketing costs
  • M&A activity among Human Capital Management companies continues to be active, examples include Futuris’ acquisition of Savantis staffing division[14] and WorkGenius acquisition of JBC[15]. However financial sponsors are lagging year over year and will likely not meet last year’s record number of transactions[16]
  • Although valuations in the sector have declined in line with market indices, we believe valuations will moderate given the productive value most HCM companies provide their clients in a post pandemic environment
  • With valuations moderating, we expect strategic acquirers to remain active. Cross-border transactions should draw the interest of both strategic and financial buyers, as companies seek to grow internationally by acquiring broader product suites and new clients in new geographies

MergerMarket - Criteria: Target Sector is Business support services or Consulting services (excl. IT consulting) or Distributors or Engineering services or Importers and wholesalers or Other services, located in USA and completed between 01/01/2022 - 30/06/2022

Consumer, Leisure & Retail

  • The current challenges faced by restaurant operators (including record food, energy and wage inflation), labor shortages, and supply chain constraints continue to cloud the outlook for the industry and overall M&A market
  • M&A activity in the sector slowed substantially in Q1 22, with deal volumes down vs levels experienced in both Q1 21 and Q4 21. We believe the negative sales and labor impacts from the Omicron variant experienced at the beginning of the year, combined with near-term economic uncertainty resulting from historically high price inflation and low consumer sentiment, will continue to impact the supply of quality and actionable transaction opportunities in the market
  • Despite these challenges, the industry continues to experience positive sales growth, shown by the 0.3% increase in retail sales in the US from July to August[17]. Given the response to heightened consumer demand for eating out, reduced capacity from restaurant closures during the pandemic, and strong balance sheets, many restaurant concepts are accelerating new unit growth and development - which should lead to increased capital raising and M&A transactions throughout the year
  • We expect the supply of M&A opportunities to pick up over the next several months, as weak twelve-month performance was followed by a Covid-impacted Q1, and emerging operators seek new capital partners to support their next phases of growth
  • With continued commodity price pressures, labor challenges, and technological investment needs, we expect strategic consolidation activity across all segments to remain strong through-out the year. We also predict that financial sponsors will focus their investment activity on both franchisors with asset-light business models and in top-tier quick service restaurant systems, which have historically proven to be more recession resilient

MergerMarket - Criteria: Target Sector is Agri processing/ cereals or Baby food or Baked goods or Dairy products or Fish/ meat/ poultry or Food ingredients or Food-others or Fresh produce or Frozen and chilled foods or Sugar and confectionery or Consumer: Foods or Beer or Bottling/ canning or Clothes or Household electrical appliances or Household products or Luxury goods or Manufacture and supply of other consumer products or Personal care or Soft beverages or Tobacco or Toys or Wine/spirits or Consumer: Other or Apparel or Building materials/DIY/Garden or Chemists/health or Department stores or Electrical appliances or Furniture or Lifestyle including sports/music/books etc or Other retailing of consumer products and services or Supermarkets (food chains) or Vehicles or Consumer: Retail or Accommodation or Other entertainment or Restaurants/Pubs or Travel/ holidays/tour operators or Leisure,  located in USA and transaction completed between 01/01/2022 - 30/06/2022

Education & EdTech

  • The market continues to be strong across many segments of the Education / EdTech sectors. We recently saw the USD 3.72BN acquisition of Frontline Education by Roper Technologies[18], which is expected to close in Q4 22. This is a cloud-based K-12 school administration software business that has been owned by private equity for the last decade (Insight Partners / most recently Thoma Bravo)
  • Another highly active segment is the professional education sector. Over the course of the last several months, we’ve seen the equity recapitalization of 360Training by Vestar Capital[19], CornerStone OnDemand acquire SumTotal[20], Skillsoft acquire CodeAcademy[21], and Guild Education raise a USD 175M Series F at a USD 4.4B valuation[22] (after raising USD 150M a year earlier at a USD 3.75B value)
  • We also continue to see activity in the special education / behavioral healthcare arena. Examples of this include Action Behavior Centers is being acquired by Charlesbank Capital Partners for USD 840M[23], Enhanced Healthcare Partners made an investment in Howard J. Chudler & Associates[24] and the sale of the Rebecca and Aaron Schools to New Story[25]

MergerMarket - Criteria: Target Sector is Educational & Training Services  ,located in USA and transaction completed between 01/01/2022 - 30/06/2022


  • Like many other verticals, public media companies have experienced significant declines in their stock prices and corresponding revenue multiple since the end of 2021
  • Platforms and streaming services have been the most severely impacted with Snap[26] and Roku[27] experiencing the most significant declines. Companies with diverse revenue sources and businesses outside of content driven media have been the least impacted
  • The private markets have experienced a slowdown in volume in 2022. However, transactions and funding rounds that were driven by strategic business requirements have received strong valuations. Notable examples with multiples over 5x revenue include the USD 100M funding round of Overtime led by Liberty Media Corporation[28], Industry Dive’s acquisition of Informa for USD 550M[29] and Cox’s acquisition of Axios for USD 525M[30]
  • We expect the slowdown in overall private market activity to continue into 2023. However, there is still significant capital that needs to be deployed. We anticipate private funding deals will continue with more structured terms - providing downside protection for investors / buyers and upside opportunity for founders / sellers 

MergerMarket - Criteria: Target Sector is Cable equipment or Mobile/satellite network equipment or Voice and data communication equipment or Telecommunications: Hardware located in USA and transaction completed between 01/01/2022 - 30/06/2022


  • M&A transaction volume moderated in Q2 22 relative to elevated levels seen throughout 2021 and Q1 2022
  • The moderation in activity levels comes as corporates and investors evaluate and navigate the increasing interest rate environment amid volatility in raw material costs
  • We continue to observe companies with strong ESG-related themes receiving significant interest from both corporate acquirers and private investors, and believe that the transaction environment remains quite healthy for businesses demonstrating resilience amid the current macroeconomic environment

MergerMarket - Criteria: Target Sector is Agrochemicals or Commodity chemicals (non-petrochemical) or Construction chemicals or Cosmetic/care chemicals or Fine chemicals- other or Fine chemicals- pharmaceuticals or Flavours and fragrances or Food additives/ ingredients or Industrial gases or Inorganic chemicals or Paints and chemicals or Petrochemicals- base or Petrochemicals- derivatives or Specialities - intermediates or Speciality-other or Chemicals and materials or Aggregates or Building suppliers (trade) or Cement or Concrete or Construction services or Glass or Heavy construction or Manufacture of pre fabricated buildings and system or Other heavyside materials or Other lightside materials or Plastics or PVC Windows or Residential builders or Construction or Industrial measurement and sensing equipment or Machine vision systems or Numeric and computerised control of machine tools or Process control equipment or Robotics or Industrial automation or Rail stock and parts or Pumps and compressors or Pollution and recycling related or Other metal products or Iron and steel production or Industrial Services or Industrial equipment and machinery or Aluminium raw material production or Analytical and scientific instrumentation or Batteries and Power supplies or Electrical components or Fibre optics and electric cabling or Industrial: Electronics , located in USA and completed between 01/01/2022 - 30/06/2022.

Technology & Software

Cybersecurity’s insulation from macro turbulence

  • While the pull-back and turbulence in the public market have been top of mind for many, our view and the consensus from our conversations with other market participants is that private financing and M&A valuations for cybersecurity companies have been, and are likely to continue to be, less impacted
  • Continued strong demand for cybersecurity solutions underpins a strong growth outlook, both near-term and long-term, providing support for continued strong valuations. Given the threat landscape, growing attack surface area and economic / reputational damage of breaches, cybersecurity spending is likely to continue increasing across all segments (SMB to enterprise) as a critical area of IT spend
  • Significant capital will likely continue to need to be deployed, whether it be in venture capital / private equity dry powder following strong fundraising activity, or from the balance sheets of a well-funded strategic acquirers whose desire to augment organic growth and continue expanding product and service capabilities will likely drive a healthy amount of M&A

Premium cybersecurity companies will likely continue to attract premium valuations

  • In our view, cybersecurity companies performing well are likely to continue garnering premium valuations. We’ve observed rapid growth continuing to be the primary valuation driver, though in recent conversations with investors capital efficiency has been an increasingly important area of focus. Gone for now are the days of growth at all costs. There is also likely to be increasing divergence in valuations between tier “A” and non-tier “A” companies, with the bar to achieve premium valuations being raised

Continued convergence of software and services models

  • We’ve observed cybersecurity companies continue to diversify their capabilities and blur the lines between pure-play models. For example, we saw CrowdStrike as forward thinking in its approach. Palo Alto Network’s acquisition of Crypsis[31] was an early example of this trend from an M&A perspective. More recent transactions include Google’s acquisition of Mandiant[32], Thales’ acquisition of both S21Sec and Excellium[33] and HelpSystems’ acquisition of AlertLogic[34]. From our conversations, product-oriented companies’ specific areas of services M&A interest include:
    • managed services to bundle with software sales;
    • threat intelligence to enhance the threat detection capabilities of existing software products; and
    • incident response, offensive penetration testing and other highly specialized services to better address niche cases and supplement lead generation
  • Service providers have also expressed interest in product-oriented technology tuck-in acquisitions to enhance and differentiate offerings. We believe security automation, orchestration, and response and other automation capabilities continue to be of interest for services providers to enhance scalability and expand margins. Recent examples of services companies adding technology via M&A include ReliaQuest’s acquisition of Digital Shadows[35], Kroll’s acquisition of both Crisp[36] and Resolver[37], BlueVoyant’s acquisition of 202 Group[38] and eSentire’s acquisition of CyFIR[39]
  • Increasingly viewed as the first line of cyber defense, we are seeing identity security continue to be a key area of interest for the market. Beyond IAM and PAM capabilities, companies have expressed growing interest in gaining via acquisition identity-as-a-service / managed identity capabilities as well as abstraction layers to integrate identity into broader security offerings

MergerMarket - Criteria: Target Sector is Application software products or Operating systems and systems-related software or Software development or Systems integration or Data processing or IT consulting, located in USA and transaction completed between 01/01/2022 - 30/06/2022

Real Estate

  • In face of a potential market slowdown, single-family housing affordability is reaching lows not seen since pre-crisis 2007 primarily caused by supply-demand mismatch and pandemic related economic woes
  • The multifamily sector saw strong momentum at the beginning of 2022 with investment increasing by 56% YoY to USD 63B in Q1[40]. Vacancy rate fell by 20 bps quarter-over quarter and 2.5 percentage points YoY to a record low 2.3%[41]
  • As pandemic worries wane, we have witnessed CRE somewhat strengthen in 2022 despite rising interest rates, high inflation, and fears of recession
  • Investors continue to focus on data-driven platforms to further push the digitization of the home buying experience fueled by the pandemic

MergerMarket - Criteria: Target Sector is Real Estate, located in USA and transaction completed between 01/01/2022 - 30/06/2022


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