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Alternative Market Briefing

M&A slows in first quarter

Tuesday, May 02, 2023

Bailey McCann, Opalesque New York:

Global M&A activity hit a new low in the first quarter, according to a new report from PitchBook. First quarter activity amounted to $992.5 billion.

According to the report, the bulk of M&A activity is coming from deals in the sub-$100M size range that are heavily discounted. These transactions have a median enterprise value (EV) to revenue multiple of 1.1x based on the last 12 months of deal flow, a 31.3% discount.

Downward pressure is hitting private equity led deals - with significant multiple contraction. The median multiple on PE deals now stands at 1.7x revenue, compared to 2.4x revenue in 2022, report data shows.

Q1 2023 deal value declined by 10.0%, pushing below a sluggish Q3 2022. Quarterly deal flow is now on par with pre-COVID-19 levels. The report authors note that lower valuations have propped up deal flow with both private equity and corporate buyers.

Cross-border M&A has also slowed significantly. Cross-border activity between North America and Europe has slowed by 38.4% and 45.7%, respectively, the report says. The purchasing power of the US dollar has retreated which is slowing the flow of capital to Europe and elsewhere from American acquirers.

For the deals that are getting done, most of them are happening in the business-to-business sector and technology sector. Lower valuations have supported transaction activity in both sectors. The bulk of the deals are coming from founder owned/operated compan......................

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