Based on what I have been seeing in the market, great opportunities exist for buyers and sellers in M&A despite indications of economic headwinds. Interest is still high for businesses with strong fundamentals, or those in generally cyclical-resistant industries, particularly as tack-ons for strategics or existing PE portfolio platforms. I also anticipate that the secondaries market will be quite active as sponsors may seek to extend hold periods for platforms that are disproportionately impacted by an economic dip.
Kristian M. Herrmann, M&A, Los Angeles
In spite of the challenging environment, there are reasons for optimism in 2023. Borrowing costs and economic headwinds are putting pressure on valuations, and financial sponsors have significant capital to deploy as those valuations become more attractive. Demand for infrastructure, healthcare, digital and software assets will remain strong. A weak pound will make UK assets attractive to foreign capital, and distressed situations will also create opportunities. Sponsors will seek value in complex transactions and will double down on strong assets through acquisitions. Top that with regulatory change and assertive regulators, and we have the ingredients for an interesting 2023.
Liam Arthur, M&A, London
We’re still going to see deals as there’s still record levels of dry powder being held by PE funds that needs to be deployed. However, buyers are going to be more selective in bidding as everyone’s chasing the best – not every – asset. That, combined with potentially unavailable credit markets, means a lot of opportunities for tack-ons. A well-established platform may already have a facility with leverage available, and since an add-on might not attract higher multiples, they may be able to purchase with all equity (taking potential synergy savings into account). There is a big opportunity for buyers this year.
James C. H. Lee, M&A, New York
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