Six Key Themes to Watch in M&A in 2023

Six Key Themes to Watch in M&A in 2023

Our Industrials Partner, Larry Gelwix, shares key themes to watch in M&A in 2023.


1. Expect the Federal Reserve and central banks around the world to continue rate tightening longer than the most optimistic people are hoping

○  Financing markets for M&A transactions will remain tight
○  Private lenders will continue to increase their market share and position in M&A financing

2. Tight financing markets will create a unique window of opportunity for well-capitalized acquirers capable of reducing financing risk

○  Some private and financial sponsor sellers will be open to bilateral sale transactions where buyers can demonstrate deal and financing certainty
○  Private equity sellers will be focused on meeting fund return requirements and will wait out the tighter markets if current price discovery does not yield adequate results

3. The world will continue to be on recession watch

○  Market participants will proceed with caution but will be looking for opportunities to act
○  The valuation gap that inhibited M&A activity in 2022 is closing which will facilitate more action

4. The US will continue to be a relative safe haven for economic activity

○  Expect increased foreign interest in US acquisitions
○  But US Dollar strength will actually create better acquisitions opportunities for US buyers looking abroad

5. Look for large, diversified strategics to closely review their portfolios

○  Companies will be looking to be on the right side of portfolio alignment after the myriad challenges of the past few years
○  Corporate sellers are more likely to run traditional auctions for divestiture assets but will be more open to creative alternatives

6. Private equity to pursue more public company take privates

○  As stock prices settle and move further away from recent highs, expect more interest in take private activity and look for club deals to form
○  Increased financing costs and tight markets will be a headwind so expect some initial over-equitization in PE capital structures and further pursuit of continuation vehicles for existing portfolio companies

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