Webinar Key Takeaways: Current U.S. Middle-Market M&A Market Update

Foley recently hosted a webinar where Craig Roush and Jonathan Witt broke down the current U.S. Middle-Market M&A ($25 million – $250 million) trends through the third quarter of 2023.

Much has been said about the return of M&A in 2023, and while there are deals happening, it is not the boom that many expected – but there remain promising signs heading into 2024.  Additionally, in this changing climate, aspects of middle-market M&A that were once uncommon have begun to standardize and vice versa.  Here are some of the key takeaways from the discussion:

• Deal volume is down almost 10% YTD 2023 vs. 2022, and both volume and pricing have been in a downward trend off the peak of 2021 as parties face interest rate- and financing-driven headwinds.
• Despite the downward trend, M&A activity is still above the pre-pandemic levels of 2019, and a backlog of transactions is building that suggests M&A will be resilient heading into 2024. Buyers have record levels of dry powder, and private equity firms, strategic sellers, and family owners all have reasons to look for exits.
• The economic picture may also be brightening as we head into 2024 – inflation appears to be cooling, interest rates may be peaking, and the long-term macroenvironment appears stable.
• In the near term, credit markets continue to see challenges, with deal financing coming at higher prices and sometimes making up a small portion of the debt/equity mix.
• IPO markets, de-SPAC markets, and foreign investment in U.S. companies are all currently down, while increased buyer and government scrutiny has created additional near-term pressures.
• Representation and warranty insurance have become standard. The short-term decline in M&A activity has led to more advantageous policy terms and pricing for buyers as insurers look to fill excess capacity.

If you were unable to join us for this webinar, we encourage you to view the recording. If you have any questions relating to the topics covered, please contact Craig Roush or Jonathan Witt.